Towards a Financial-based View of Business Failure

Abstract

The survival of a company finds its limit in the problems faced throughout its existence
and which are likely to lead her to failure. Indeed, the company can be affected during
its existence by several parameters that can compromise its durability, among which we
mention: continuous or discontinuous decrease of activity, loss of business orders, debt
recovery problems, imbalanced financial structure or a small capitalization,
governmental tax adjustment, shareholders changes, key man death, social movement,
etc. This makes business failure a transversal, dynamic and complex concept including
many sides and multiple definitions.
The aim of this paper is to highlight the contribution of various studies dedicated to
business failure. An in-depth analysis of the literature as well as the factors explaining
distress, leads us to develop a research model of business failure based on a financial
approach.