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European country heterogeneity in financial distress prediction: An empirical analysis with macroeconomic and regulatory factors

Manuel Ángel Fernández-Gámez, Juan Antonio Campos Soria, José António C. Santos and David Alaminos

Economic Modelling, 2020, vol. 88, issue C, 398-407

Abstract: This study tried to improve the understanding of the impact of context variables on the risk of financial difficulties from an European companies experience. To this end, a multilevel logistic model is developed to exploit the benefits of transnational analysis and to examine the effects of contextual factors in countries and the individual impacts of companies within each country. The resulting estimates and the post-estimation analysis based on non-parametric techniques demonstrated that country effects vary randomly but that significant variance exists in the level of financial distress within and between countries. The results also corroborate that companies’ financial variables provide extremely important information. However, the macroeconomic and regulatory factors of the environments in which these companies operate help to explain, to a large extent, the existing heterogeneity among countries.

Keywords: Financial distress; Country effect; Multilevel analysis; Macroeconomic factors; Regulatory factors; European countries (search for similar items in EconPapers)
JEL-codes: C39 E66 F21 G32 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.econmod.2019.09.050

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