The risk of financial distress in the era of industry 4.0 in Central European economies. Impact of industry and corporate life cycle
The risk of financial distress in the era of industry 4.0 in Central European economies. Impact of industry and corporate life cycle

Summary/Abstract: Research background: Industry 4.0 is a challenge for all world economies considering the new technologies and innovations that need to be put into operation. However, these investments can be highly risky and increase the risk of financial distress and/or increase the number of bankruptcies in industries. Purpose of the article: The aim of this study is to investigate and evaluate the impact of the industry structure and the life cycle of the company on the risk of financial distress of companies in Central Europe. Methods: The effect of industry structure and corporate life cycle was investigated using twoway analysis of variance and corresponding post hoc tests. More than 30,000 Central European companies were surveyed using financial data for 2019. The industry structure was created according to NACE rev. 2 and the stage of the life cycle was determined according to the cash flow pattern of the Dickinson model. Findings & Value added: The results of the study show that the risk of financial distress develops dynamically in accordance with an inverted U-shape, where the risk of financial distress of growing enterprises is smaller than the risk of mature enterprises. Start-up, growing, mature and declining businesses have similar risks of financial distress within the life cycle stage regardless of industry structure. The influence of the industry is visible only in companies in the shake-out stage, where some industries are less risky, and the shake-out stage is an extension of the company's maturity. In other industries, the risk of financial distress increases rapidly after the maturity stage. The results of the study can be helpful for the academic community, but also for practice in determining industry support for the introduction of Industry 4.0, where start-ups have a similar starting line in terms of the emergence of financial distress.

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