Corporate default prediction with payment disturbances in managers’ earlier entrepreneurial practices
AbstractThis study aims to determine how payment disturbances in managers’ earlier entrepreneurial practices (PDMs) predict corporate default. Classical financial ratios have often failed to predict the default of micro-, small- and medium-sized firms with high accuracy, and therefore, the extant li...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2024-12-01
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| Series: | Cogent Business & Management |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23311975.2024.2302203 |
| _version_ | 1797324062858412032 |
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| author | Art Andresson Oliver Lukason |
| author_facet | Art Andresson Oliver Lukason |
| author_sort | Art Andresson |
| collection | DOAJ |
| description | AbstractThis study aims to determine how payment disturbances in managers’ earlier entrepreneurial practices (PDMs) predict corporate default. Classical financial ratios have often failed to predict the default of micro-, small- and medium-sized firms with high accuracy, and therefore, the extant literature has been focused on searching novel non-financial predictors. In this study, an integrational theoretical framework about PDMs in corporate default prediction is created and respective hypotheses postulated. The empirical part of the paper applies the population of Estonian defaulted and non-defaulted firms with three different prediction methods, while the predictors included three variables portraying PDMs and four classical financial ratios. The results indicate that PDMs lead to more accurate predictions of corporate defaults than financial ratios do. Among the specific variables, the average tendency of earlier disturbances was the most accurate, followed by the maximum and frequency tendencies. Therefore, the prevalence of payment behaviour issues by means of size and duration is more common in the entrepreneurial history of managers of defaulted firms than in that of non-defaulted firms. Additionally, the role of size, age, business-to-business, international orientation, and serial entrepreneurship contexts on the results is outlined. By introducing novel variables, this study is valuable for corporate default prediction in practice, especially when financial variables for respective purpose are absent or when they fail to signal the forthcoming default. |
| first_indexed | 2024-03-08T05:44:50Z |
| format | Article |
| id | doaj.art-8033259bfdfe490ab75090d8c1039b36 |
| institution | Directory Open Access Journal |
| issn | 2331-1975 |
| language | English |
| last_indexed | 2024-03-08T05:44:50Z |
| publishDate | 2024-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Business & Management |
| spelling | doaj.art-8033259bfdfe490ab75090d8c1039b362024-02-05T13:18:49ZengTaylor & Francis GroupCogent Business & Management2331-19752024-12-0111110.1080/23311975.2024.2302203Corporate default prediction with payment disturbances in managers’ earlier entrepreneurial practicesArt Andresson0Oliver Lukason1School of Economics and Business Administration, University of Tartu, Tartu, EstoniaSchool of Economics and Business Administration, University of Tartu, Tartu, EstoniaAbstractThis study aims to determine how payment disturbances in managers’ earlier entrepreneurial practices (PDMs) predict corporate default. Classical financial ratios have often failed to predict the default of micro-, small- and medium-sized firms with high accuracy, and therefore, the extant literature has been focused on searching novel non-financial predictors. In this study, an integrational theoretical framework about PDMs in corporate default prediction is created and respective hypotheses postulated. The empirical part of the paper applies the population of Estonian defaulted and non-defaulted firms with three different prediction methods, while the predictors included three variables portraying PDMs and four classical financial ratios. The results indicate that PDMs lead to more accurate predictions of corporate defaults than financial ratios do. Among the specific variables, the average tendency of earlier disturbances was the most accurate, followed by the maximum and frequency tendencies. Therefore, the prevalence of payment behaviour issues by means of size and duration is more common in the entrepreneurial history of managers of defaulted firms than in that of non-defaulted firms. Additionally, the role of size, age, business-to-business, international orientation, and serial entrepreneurship contexts on the results is outlined. By introducing novel variables, this study is valuable for corporate default prediction in practice, especially when financial variables for respective purpose are absent or when they fail to signal the forthcoming default.https://www.tandfonline.com/doi/10.1080/23311975.2024.2302203Payment default predictionfirm failureearlier entrepreneurial practicesprevious payment disturbancesmanagerial behaviourfinancial ratios |
| spellingShingle | Art Andresson Oliver Lukason Corporate default prediction with payment disturbances in managers’ earlier entrepreneurial practices Cogent Business & Management Payment default prediction firm failure earlier entrepreneurial practices previous payment disturbances managerial behaviour financial ratios |
| title | Corporate default prediction with payment disturbances in managers’ earlier entrepreneurial practices |
| title_full | Corporate default prediction with payment disturbances in managers’ earlier entrepreneurial practices |
| title_fullStr | Corporate default prediction with payment disturbances in managers’ earlier entrepreneurial practices |
| title_full_unstemmed | Corporate default prediction with payment disturbances in managers’ earlier entrepreneurial practices |
| title_short | Corporate default prediction with payment disturbances in managers’ earlier entrepreneurial practices |
| title_sort | corporate default prediction with payment disturbances in managers earlier entrepreneurial practices |
| topic | Payment default prediction firm failure earlier entrepreneurial practices previous payment disturbances managerial behaviour financial ratios |
| url | https://www.tandfonline.com/doi/10.1080/23311975.2024.2302203 |
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