Bankruptcy risk, productivity and firm strategy

Purpose – The purpose of this paper is to examine the relationship between productivity, firm strategy and bankruptcy risk. Design/methodology/approach – This paper uses data envelopment analysis to compute productivity of firms and uses archival data to empirically examine the relationship between...

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Bibliographic Details
Published inReview of accounting & finance Vol. 12; no. 4; pp. 309 - 326
Main Authors Bryan, Daniel, Dinesh Fernando, Guy, Tripathy, Arindam
Format Journal Article
LanguageEnglish
Published Patrington Emerald Group Publishing Limited 28.10.2013
Subjects
Accounting
Accounting & Finance
Accounting/accountancy
Bankruptcy
Bankruptcy reorganization
Competition
Data envelopment analysis
Default
Discriminant analysis
Economic models
Hypotheses
Leadership
Literature reviews
Macroeconomics
Productivity
Risk management
Standard scores
Studies
United States > US
Bankruptcy risk
Mediation effect
Data envelopment analysis
Firm strategy
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Summary:Purpose – The purpose of this paper is to examine the relationship between productivity, firm strategy and bankruptcy risk. Design/methodology/approach – This paper uses data envelopment analysis to compute productivity of firms and uses archival data to empirically examine the relationship between productivity, firm strategy and bankruptcy risk. Findings – The results indicate that productivity has a positive effect on reducing bankruptcy risk, and the results also indicate that pursuing either of the generic strategies successfully has a positive effect on reducing bankruptcy risk. The study also brings to light the mediating effect of productivity in the relationship between strategy and bankruptcy risk. Research limitations/implications – The effect of productivity and firm strategy on bankruptcy risk is of importance to external stakeholders such as lenders and investors to evaluate the bankruptcy risk of such a firm. Internal stakeholders (managers and management consultants) will find this study expedient by using productivity enhancements and effective strategy implementation to mitigate bankruptcy risk. Originality/value – This is the first paper to highlight the link between productivity and bankruptcy risk, firm strategy and bankruptcy risk and the mediation effects of productivity on the link between a cost leadership strategy and bankruptcy risk.
ISSN:1475-7702
1758-7700
DOI:10.1108/RAF-06-2012-0052