Financial distress and the role of management in micro and small-sized firms

Detalhes bibliográficos
Autor(a) principal: Alexandre, Fernando
Data de Publicação: 2020
Outros Autores: Cruz, Sara Cristina Santos, Portela, Miguel
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: https://hdl.handle.net/1822/67315
Resumo: In this paper, we focus on managerial characteristics of micro and small-sized firms. Using linked employer-employee data on the Portuguese economy for the 2010-2018 period, we estimate the impact of management teams' human capital on the probability of firms becoming financially distressed and on their subsequent recovery. Our estimates show that the relevance of management teams' formal education on the probability of firms becoming financially distressed depends on firms' size and the type of education. We show that management teams' formal education and tenure reduces the probability of micro and small-sized firms becoming financially distressed and increases the probability of their subsequent recovery. The estimates also suggest that those impacts are stronger for micro and small-sized firms. Additionally, our results show that functional experience previously acquired in other firms, namely in foreign-owned and in exporting firms and in the area of finance, may reduce the probability of micro firms becoming financially distressed. On the other hand, previous functional experience in other firms seems to have a strong and highly significant impact on increasing the odds of recovery of financially distressed firms. We conclude that policies that induce an improvement in the managerial human capital of micro and small-sized firms have significant scope to improve their financial condition, enhancing the resilience of the economy against shocks.
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spelling Financial distress and the role of management in micro and small-sized firmsFinancial distresshuman capitalfirm performanceCiências Sociais::Economia e GestãoG32J24L25In this paper, we focus on managerial characteristics of micro and small-sized firms. Using linked employer-employee data on the Portuguese economy for the 2010-2018 period, we estimate the impact of management teams' human capital on the probability of firms becoming financially distressed and on their subsequent recovery. Our estimates show that the relevance of management teams' formal education on the probability of firms becoming financially distressed depends on firms' size and the type of education. We show that management teams' formal education and tenure reduces the probability of micro and small-sized firms becoming financially distressed and increases the probability of their subsequent recovery. The estimates also suggest that those impacts are stronger for micro and small-sized firms. Additionally, our results show that functional experience previously acquired in other firms, namely in foreign-owned and in exporting firms and in the area of finance, may reduce the probability of micro firms becoming financially distressed. On the other hand, previous functional experience in other firms seems to have a strong and highly significant impact on increasing the odds of recovery of financially distressed firms. We conclude that policies that induce an improvement in the managerial human capital of micro and small-sized firms have significant scope to improve their financial condition, enhancing the resilience of the economy against shocks.This paper is financed by National Funds of the FCT - Portuguese Foundation for Science andTechnology, projects UIDB/03182/2020 and PTDC/EGE-ECO/29822/2017 (“It’s All About Produc-tivity: contributions to the understanding of the sluggish performance of the Portuguese economy”).Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)Universidade do MinhoAlexandre, FernandoCruz, Sara Cristina SantosPortela, Miguel20202020-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/1822/67315enghttps://www.eeg.uminho.pt/pt/investigar/nipe/Paginas/publicacoes.aspxinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-21T11:56:39Zoai:repositorium.sdum.uminho.pt:1822/67315Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:46:16.052847Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Financial distress and the role of management in micro and small-sized firms
title Financial distress and the role of management in micro and small-sized firms
spellingShingle Financial distress and the role of management in micro and small-sized firms
Alexandre, Fernando
Financial distress
human capital
firm performance
Ciências Sociais::Economia e Gestão
G32
J24
L25
title_short Financial distress and the role of management in micro and small-sized firms
title_full Financial distress and the role of management in micro and small-sized firms
title_fullStr Financial distress and the role of management in micro and small-sized firms
title_full_unstemmed Financial distress and the role of management in micro and small-sized firms
title_sort Financial distress and the role of management in micro and small-sized firms
author Alexandre, Fernando
author_facet Alexandre, Fernando
Cruz, Sara Cristina Santos
Portela, Miguel
author_role author
author2 Cruz, Sara Cristina Santos
Portela, Miguel
author2_role author
author
dc.contributor.none.fl_str_mv Universidade do Minho
dc.contributor.author.fl_str_mv Alexandre, Fernando
Cruz, Sara Cristina Santos
Portela, Miguel
dc.subject.por.fl_str_mv Financial distress
human capital
firm performance
Ciências Sociais::Economia e Gestão
G32
J24
L25
topic Financial distress
human capital
firm performance
Ciências Sociais::Economia e Gestão
G32
J24
L25
description In this paper, we focus on managerial characteristics of micro and small-sized firms. Using linked employer-employee data on the Portuguese economy for the 2010-2018 period, we estimate the impact of management teams' human capital on the probability of firms becoming financially distressed and on their subsequent recovery. Our estimates show that the relevance of management teams' formal education on the probability of firms becoming financially distressed depends on firms' size and the type of education. We show that management teams' formal education and tenure reduces the probability of micro and small-sized firms becoming financially distressed and increases the probability of their subsequent recovery. The estimates also suggest that those impacts are stronger for micro and small-sized firms. Additionally, our results show that functional experience previously acquired in other firms, namely in foreign-owned and in exporting firms and in the area of finance, may reduce the probability of micro firms becoming financially distressed. On the other hand, previous functional experience in other firms seems to have a strong and highly significant impact on increasing the odds of recovery of financially distressed firms. We conclude that policies that induce an improvement in the managerial human capital of micro and small-sized firms have significant scope to improve their financial condition, enhancing the resilience of the economy against shocks.
publishDate 2020
dc.date.none.fl_str_mv 2020
2020-01-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv https://hdl.handle.net/1822/67315
url https://hdl.handle.net/1822/67315
dc.language.iso.fl_str_mv eng
language eng
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dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
publisher.none.fl_str_mv Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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