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Article

Is Bankruptcy Risk Tied to Corporate Life-Cycle? Evidence from Pakistan

1
International Business School, Guangzhou College of South China University of Technology, Guangzhou 510080, China
2
Department of Management Sciences, COMSATS University Islamabad (Sahiwal Campus), Sahiwal 5700, Pakistan
3
School of Finance, Zhongnan University of Economics and Law, Wuhan 430073, China
4
Oslo Business School, Oslo Metropolitan University, 0130 Oslo, Norway
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(3), 678; https://doi.org/10.3390/su11030678
Submission received: 18 December 2018 / Revised: 23 January 2019 / Accepted: 24 January 2019 / Published: 28 January 2019
(This article belongs to the Section Economic and Business Aspects of Sustainability)

Abstract

In this paper we analyze the relationship between bankruptcy risk and the corporate life cycle in Pakistan from 2005 to 2014. For this purpose, we run a Hierarchical Linear Mixed Model (HLM) for a sample of 301 non-financial listed firms in 12 different sectors. The empirical outcomes reveal that firms during introduction, growth and, decline stages (mature stage) of life-cycle experience higher (lower) bankruptcy risk. Moreover, in juxtaposition with growth stage, bankruptcy risk is higher at the introduction stage of life-cycle. These findings suggest that financial managers should be cautious about the financial fragility of the firm at each stage of corporate life-cycle. The results also entail that Pakistani firms do not follow a sequential pattern in their life-cycle, rather they have the tendency to revert to a previous stage or jump to the next stage of life-cycle. This is the first study that empirically examines the association between firm life-cycle stage and corresponding bankruptcy risk and asserts that managers must incorporate the life-cycle effects into their financial planning and decision making for the sustainable working of an enterprise.
Keywords: Corporate Life-cycle; Bankruptcy Risk; Financial Sustainability; Pakistan Corporate Life-cycle; Bankruptcy Risk; Financial Sustainability; Pakistan

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MDPI and ACS Style

Akbar, A.; Akbar, M.; Tang, W.; Qureshi, M.A. Is Bankruptcy Risk Tied to Corporate Life-Cycle? Evidence from Pakistan. Sustainability 2019, 11, 678. https://doi.org/10.3390/su11030678

AMA Style

Akbar A, Akbar M, Tang W, Qureshi MA. Is Bankruptcy Risk Tied to Corporate Life-Cycle? Evidence from Pakistan. Sustainability. 2019; 11(3):678. https://doi.org/10.3390/su11030678

Chicago/Turabian Style

Akbar, Ahsan, Minhas Akbar, Wenjin Tang, and Muhammad Azeem Qureshi. 2019. "Is Bankruptcy Risk Tied to Corporate Life-Cycle? Evidence from Pakistan" Sustainability 11, no. 3: 678. https://doi.org/10.3390/su11030678

APA Style

Akbar, A., Akbar, M., Tang, W., & Qureshi, M. A. (2019). Is Bankruptcy Risk Tied to Corporate Life-Cycle? Evidence from Pakistan. Sustainability, 11(3), 678. https://doi.org/10.3390/su11030678

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