Analysis of corporate viability in the pre-bankruptcy proceedings

Abstract

Companies in financial difficulties can avail themselves of the pre-bankruptcy procedure, prior to its entry in the legal process of insolvency. The objective of this paper is to look for a possible diagnosis of some common distressed firm’s characteristics in order to be successful at pre-bankruptcy procedure through artificial intelligence methodologies. Using a Spanish sample of bankrupt and healthy firms, our results show that financial viability and working capital ratios are fundamental for the effectiveness of pre-bankruptcy legal procedure. These findings may help to shed light on the implications for all the stakeholders involved in a pre-bankruptcy procedure.