Factors affecting the insolvency in Latvia
2017
Muska, A., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics and Social Development | Auzina, A., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics and Social Development
The solvency of an enterprise is one of the central problems that is tackled by the management of the enterprise during the entire period of doing business by the enterprise. The research aim is to examine exogenous factors affecting the solvency of enterprises in Latvia. The research novelty involves the identification and analysis of exogenous factors affecting the solvency of enterprises in Latvia in the period 2006–2015 by means of pairwise correlation analysis. The research concluded that the global economic crisis affected the solvency of enterprises in Latvia, yet since 2011 the situation has stabilised and the number of proclaimed insolvency cases reached the precrisis level – on average, 84 cases per 10 000 registered enterprises. In tackling insolvency problems in Latvia, entrepreneurs mainly preferred insolvency proceedings, in the result of which the economic activity of the enterprise was terminated. In the period of analysis in Latvia, only 1 % of entrepreneurs who underwent insolvency proceedings and 4 % of entrepreneurs who filed for legal protection proceedings were able to restore their solvency and continue their business. In the period 2006-2015 in Latvia, the solvency of enterprises was affected by: (1) socio-economic factors of the overall development of the country (GDP contraction, increase in unemployment and decrease in the number of the employed), (2) market factors (decrease in imports) and (3) other factors (negative demographic trends).
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