The predictability of financial data on post-entry success or failure before and during the recent crisis

Abstract

This paper does research on the predictability of seven financial factors and one nonfinancial factor on the success or failure of entrants. It enriches the empirical study of the literature of predicting business success or failure and post-entry performance. Particularly chosen are the firms incorporated in 2000, 2001, 2008 and 2009 in manufacturing and distributive industries. Logistic model is used for analysis and comparison of the changes of the predictability in three dimensions: year after year versus just the first year, manufacturing versus distributive industries, and before versus during the recent crisis. The results show instability in the predictability of some financial factors especially in the year after year analysis. However, positive effects of firm size, profitability and corporate group on success are observed; besides, asset liquidity plays a more significant role in manufacturing industries. The predictability of liability-related factors seem to be particularly influenced by the crisis: in the year after year analysis, when stepping into the crisis the predictability of indebtedness is not as strong as it is in the pre-crisis period and the predictability of liability liquidity weakens more in manufacturing industries compared to distributive industries.