Bankruptcy risk, productivity and firm strategy

Daniel Bryan, Guy Dinesh Fernando and Arindam Tripathy

Review of Accounting and Finance, 2013, vol. 12, issue 4, 309-326

Abstract: 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.

Keywords: Data envelopment analysis; Bankruptcy risk; Firm strategy; Mediation effect (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:rafpps:v:12:y:2013:i:4:p:309-326

DOI: 10.1108/RAF-06-2012-0052

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