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Catalysts of corporate bankruptcy

Summary/Abstract: The latest financial crisis has once again sparked interest in the topic of corporate bankruptcy and bankruptcy forecasting. High-profile recent corporate collapses, like the one of Odlewnie Polskie, suggest that the predictive power of bankruptcy models is strongly limited by the cause of bankruptcy. This article investigates the difference between pure economic bankruptcy and one caused by catalysts – unforeseeable causes of distress, happening suddenly, violently pushing companies into distress. Cash flow analysis performed on a group of Polish bankruptcies from the past decade seems to confirm the existence of catalysts and opens up new research opportunities concerning their influence on the model forecasting abilities.

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