Financial Distress Comparison Across Three Global Regions

Journal of Risk and Financial Management, pp. 129-162, 2008

34 Pages Posted: 27 May 2009 Last revised: 5 Dec 2012

See all articles by Harlan D. Platt

Harlan D. Platt

Northeastern University - Finance and Insurance Area

Marjorie Platt

Northeastern University - Accounting Group

Date Written: May 25, 2009

Abstract

Globalization has precipitated movement of output and employment between regions. How similar are companies in different regions following this dramatic shift in economic activity? Corporate comparisons to test global convergence could be made along numerous dimensions. We look at firms along one dimension: what factors explain why they become financial distressed. Using a multidimensional definition of financial distress the study compiled a list of # companies in three worldwide regions. Various explanations of how corporate decline occurred in the three regions were tested using historical data. Three hypotheses describe how the three regional models of financial distress might be constructed. The null hypothesis assumes a single global model. Two alternate hypotheses relax this assumption. The null hypothesis was rejected in favor of a fully relaxed model which created individual financial distress models for each region. This result suggests that despite other indications of worldwide convergence that international differences in accounting rules, lending practices, managements skill levels, and legal requirements among others has kept corporate decline from becoming commoditized.

Keywords: bankruptcy, financial distress, global business

JEL Classification: G33, F30

Suggested Citation

Platt, Harlan D. and Platt, Marjorie, Financial Distress Comparison Across Three Global Regions (May 25, 2009). Journal of Risk and Financial Management, pp. 129-162, 2008, Available at SSRN: https://ssrn.com/abstract=1409698

Harlan D. Platt (Contact Author)

Northeastern University - Finance and Insurance Area ( email )

Boston, MA 02115
United States
617-373-4740 (Phone)
617-373-8798 (Fax)

Marjorie Platt

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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