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The relationship between bankruptcy risk and growth for non-listed firms

Author

Listed:
  • Nordal, Kjell Bjorn

    (Norges Bank)

  • Naes, Randi

    (University of Stavanger)

Abstract

We investigate the relationship between bankruptcy risk and expected future sales growth for Norwegian non-listed firms for the period 1988-2007. We find that firms with high bankruptcy risk also have high expected future growth. Financial ratios characterizing firms with high bankruptcy risk also characterize firms with high future expected growth. Small firms, firms with low levels of equity and retained earnings, firms with low profitability and low levels of sales per unit of capital, have all higher expected future growth rates than other firms. These findings suggest a tradeoff between the upside potential of high growth and the downside risk of bankruptcy.
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Suggested Citation

  • Nordal, Kjell Bjorn & Naes, Randi, 2010. "The relationship between bankruptcy risk and growth for non-listed firms," UiS Working Papers in Economics and Finance 2010/10, University of Stavanger.
    • Handle: RePEc:hhs:stavef:2010_010
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    File URL: http://www1.uis.no/ansatt/odegaard/uis_wps_econ_fin/uis_wps_2010_10_nordal_naes.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Non-listed firms; growth; bankruptcy risk;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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