Firms in Financial Distress

Publication Date
Financial Markets Group Special Papers SP 260
Publication Authors

We use simple accounting measures to estimate the share of private manufacturing firms in financial distress under a hypothetical scenario of losing half their sales from the previous year. We study the characteristics of these financially distressed firms and find that, consistent with Schumpeter’s theory, young, small, domestic market oriented and single-product firms are more likely to fall into financial distress, particularly in Western Africa.