Reasons of firm failures: example of Estonian agriculture, forestry and fishing industries in 2002-2009
2012
Lukason, O., Tartu Univ. (Estonia). Faculty of Economics and Business Administration
In the previous decades, a lot of research has been conducted on different topics of firm failures but a relatively underdeveloped research domain is failure reasons, especially in the context of primary sector firms. The main objective of current paper is to find out the failure reasons of bankrupt firms in Estonian agriculture, forestry, and fishery sector. In general, 17 different failure reasons are detected based on Estonian court judgments from 2002 to 2009. A decrease in demand, some unexpected event, and unprofitable principal activities are among the most frequent failure reasons. The average number of reasons in bankruptcy case is two. Fitting with modern failure theories, the most common is the case where external and internal causes are simultaneously present. The hypothesis that the sources of failure reason (i.e. emerging from internal or external environment of firm) vary through firms from different bankruptcy years or through firms from different industries is not supported.
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