Business failure: incidence of stakeholders' behavior

Purpose - The purpose of this paper is to analyze the potential impact of stakeholders' behavior on business failure, through its influence on the generation and distribution of value added. Design/methodology/approach - Using a sample of 2,277 Spanish SMEs - half of which were businesses that failed during the years 2006-2009 - the authors conducted an empirical study on a number of variables representing the participation of stakeholders in the generation and distribution of value added. This was undertaken in order to discern differential behavior between the variables and prove their usefulness in predicting business failure. For this purpose, a mean difference analysis between failed and non-failed businesses and a multivariate logistic regression model were applied. Findings - The results obtained show that the stakeholders' behavior in relation to their participation in the generation and distribution of value added, affects the likelihood of business failure. Originality/value - This paper provides empirical evidence of the influence of stakeholders' behavior on the likelihood of business failure, through their participation in the generation and distribution of value added. The results are useful for creating management strategies because they offer advice on the implementation of business management models based on the stakeholder approach, and on the appropriate involvement of all those who make up the conglomerate in the generation and distribution of value added. They also emphasize the value of recording information related to the Value-Added Statement in order to explain a firm's level of dependence on its stakeholders and assess the firm's risk of insolvency.