Financial distress determinants of portuguese firms

Abstract

This dissertation aims to: (1) investigate the most determinant factors responsible for the financial distress of Portuguese firms, (2) identify the most common causes for the rejection of firms’ restructuring plans and (3) understand if the state and condition of the company both when it asks for help and when it initiates its restructuring plan affect their survival in the future.Financial distress determinants are identified by analysing the companies that applied for Processo Especial de Revitalização (PER) and by comparing them to analogous healthy firms. The impact of these factors on companies’ likelihood of distress and survival is acknowledged through logistic regressions. The variables included in the models considered the context of Portuguese companies and aimed to account simultaneously for endogenous and exogenous distress factors.The findings suggest that both endogenous and exogeneous factors impact the likelihood of firms’ financial distress. Endogenous factors, such as companies’ corporate governance and capital structures, asset efficiency and profitability levels influence both their likelihood of distress and survival in the long term. Exogenous factors such as the business cycle proved to be relevant as well to explain these two events.Results also verified that restructuring measures focusing on the reorganisation of firms’ assets, restructuration of debt, recovery of profitability and liquidity have a significant impact on their likelihood of survival in the future.

Date of Award	28 Jan 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Reis (Supervisor)