Business failure: a literature review

Abstract

Corporate failure constitutes a major economic, legal, and social issue, particularly in emerging economies such as Morocco. This article provides a critical synthesis of the theoretical and empirical approaches to understanding and predicting corporate bankruptcy, through an examination of financial, structural, and institutional determinants. Drawing on the international literature and the specific characteristics of the Moroccan context, it addresses the multidimensional nature of financial distress, the costs associated with corporate failure, resolution mechanisms, and the principal predictive models. A critical discussion of these paradigms is conducted by assessing their statistical assumptions, respective predictive performance, and theoretical as well as practical limitations. The article adopts a comparative perspective to shed light on epistemological controversies related to the selection of indicators and the determination of the optimal cut-off threshold. It is argued that the evolution of the field does not stem from a mere technological substitution, but rather from a cumulative trajectory of increasing endogenization, in which technical approaches must be articulated with economic and legal interpretative frameworks. Finally, this synthesis opens a discussion on prospects for multi-model integration, algorithmic transparency, and interpretative sovereignty in the context of the accelerating digitalization of finance.

JEL Classification: C53, G32

Type of paper: Theoretical research.