Foremost features affecting financial distress and Bankruptcy in the acute stage of COVID-19 crisis

ABSTRACT

This paper investigates the foremost firm-specific factors having an impact on financial distress and bankruptcy in the acute stage of the Covid-19 crisis based on data from approximately 9,000 enterprises in 25 countries. Empirical results of a random forest algorithm with SHAP values show increased odds of both bankruptcy and financial distress for firms that have problems in accessing finance, younger firms and more indebted firms. In addition, the size of the firm and the years of experience of its managers also have an impact on financial failure. However, country features are more important than firm features in predicting bankruptcy and financial distress in the Covid-19 crisis.

KEYWORDS:

• Bankruptcy
• financial distress
• COVID-19 Crisis
• random forest algorithm

JEL CLASSIFICATION:

• G33
• C53

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ COVf1is 1 if the enterprise has received any national or local government support in response to the crisis since the outbreak of the Covid crisis, 0 otherwise.