Understanding the stakeholders’ role in a business failure situation: An empirical boosting approach

Abstract

We investigate the stakeholders’ role in a business failure situation. In particular, we analyse which primary stakeholders have an impact on the business failure, and how. This work also proposes an order of prioritization of primary stakeholders with the purpose of showing business managers useful information which guides their decisions to reduce the emergence of conflicts of interest that may affect the sustainability of firms long-term in financial crisis situations. We have taken a sample of 2,352 Spanish SMEs, 1,176 non-failed firms matched with 1,176 failed firms, from which economic and financial data are been extracted from their financial reporting. In this vein, logistic regression and boosting methodologies have been applied. The findings indicate that the primary stakeholders have a statistically significant effect on the likelihood of business failure. Furthermore, the results present a ranking of primary stakeholders related to their impact on the likelihood of business failure in contexts of financial crisis. Thus, our study provides a useful guide to managers seeking to understand the primary stakeholders’ roles and their relative priority in business failure.

Keywords

• stakeholder
• business failure
• boosting method
• relative importance