Hubert Ooghe

Bio: Hubert Ooghe is an academic researcher from Katholieke Universiteit Leuven. The author has contributed to research in topics: Bankruptcy & Exit strategy. The author has an hindex of 29, co-authored 66 publications receiving 2938 citations. Previous affiliations of Hubert Ooghe include Ghent University.

35 years of studies on business failure: an overview of the classic statistical methodologies and their related problems

Abstract: Over the last 35 years, business failure prediction has become a major research domain within corporate finance. Numerous corporate failure prediction models have been developed, based on various modelling techniques. The most popular are the classic cross-sectional statistical methods, which have resulted in various ‘single-period’ or static models, especially multivariate discriminant models and logit models. To date, there has been no clear overview and discussion of the application of classic statistical methods to business failure prediction. Therefore, this paper extensively elaborates on the application of (1) univariate analysis, (2) risk index models, (3) multivariate discriminant analysis, and (4) conditional probability models in corporate failure prediction. In addition, because there is no clear and comprehensive analysis in the existing literature of the diverse problems related to the application of these methods to the topic of corporate failure prediction, this paper brings together all problem issues and enlarges upon each of them. It discusses all problems related to: (1) the classical paradigm (i.e. the arbitrary definition of failure, non-stationarity and data instability, sampling selectivity, and the choice of the optimisation criteria); (2) the neglect of the time dimension of failure; and (3) the application focus in failure prediction modelling. Further, the paper elaborates on a number of other problems related to the use of a linear classification rule, the use of annual account information, and neglect of the multidimensional nature of failure. This paper contributes towards a thorough understanding of the features of the classic statistical business failure prediction models and their related problems.

Failure processes and causes of company bankruptcy: a typology

Abstract: Purpose - The purpose of this paper is to show that previous research about financial and non-financial causes of bankruptcy has neglected the time dimension of failure. The paper seeks to gain deeper insight into the failure process of a company, giving it a more grounded understanding of the relationship between the characteristics of a company, the underlying causes of failure and the financial effects. Design/methodollogy/approach - The findings are based on a literature overview and in-depth case study research. Findings - Four types of failure processes were observed: the failure process of unsuccessful startups, the failure process of ambitious growth companies, the failure process of dazzled growth companies, and the failure process of apathetic established companies. Between these four failure processes, there exist major distinctions in terms of the presence and the importance of specific causes of bankruptcy, i.e. errors made by management, errors in the corporate policy and the importance of external factors. Research limitations/implications - The results of the study are based on qualitative, case study research. No attempt is made to quantify the existence and the importance of the findings. The major constructs that emerged as important in the research are well-known concepts in the management literature. As a consequence, they should be further developed in order to quantify their effect in large-scale studies. Practical implications - Based on the findings, stakeholders of a company can have a clearer view of both the time dimension inherent in corporate failure and the impact of their own actions on bankruptcy. Originality/value - The paper lays the ground for understanding the process of company failure. Company failure does not happen overnight and therefore a longitudinal and holistic perspective is needed.

The financial structure of privately held Belgian firms

Abstract: We examine the determinants of the debt-equity choice and the debt maturity choice for a sample of small, privately held firms in a creditor oriented environment. Our results, which are based on 4,706 firm-year observations for 1132 Belgian firms in the period 1996–2000, generally confirm the role of asymmetric information and agency costs of debt as major determinants of the financial structure of privately held firms. High growth firms and firms with less tangible assets have a lower debt ratio. We also find that more profitable firms have less debt. Firms tend to match the maturity of debt with the maturity of their assets. Growth options do not seem to influence debt maturity, which would suggest that the underinvestment problem is resolved by lowering leverage and by bank monitoring, not by reducing debt maturity. Credit risk is also an important determinant of debt maturity: firms with higher credit risk borrow more on the short term. Finally, in contrast to most studies on the financial structure of companies, we find that larger firms tend to have a higher debt ratio and a shorter debt maturity.

The Financial Structure of Private Held Belgian Firms

Abstract: We examine the determinants of the debt-equity choice and the debt maturity choice for a sample of small, privately held firms in a creditor oriented environment. Our results, which are based on 4,706 firm-year observations for 1132 Belgian firms in the period 1996–2000, generally confirm the role of asymmetric information and agency costs of debt as major determinants of the financial structure of privately held firms. High growth firms and firms with less tangible assets have a lower debt ratio. We also find that more profitable firms have less debt. Firms tend to match the maturity of debt with the maturity of their assets. Growth options do not seem to influence debt maturity, which would suggest that the underinvestment problem is resolved by lowering leverage and by bank monitoring, not by reducing debt maturity. Credit risk is also an important determinant of debt maturity: firms with higher credit risk borrow more on the short term. Finally, in contrast to most studies on the financial structure of companies, we find that larger firms tend to have a higher debt ratio and a shorter debt maturity.

Pre-Acquisition Profile of Privately Held Companies Involved in Takeovers: an Empirical Study

Abstract: This study addresses the pre-acquisition financial characteristics of privately held acquiring and acquired companies involved in 143 Belgian takeovers between 1992 and 1994. Specifically, the research examines the profitability, liquidity, financial structure, added value and failure risk using statistical analysis of industry-adjusted variables. Our findings show that acquisition is not an alternative to bankruptcy since acquired companies do not report high failure risk, but exhibit higher than industry liquidity and solvency. The acquirers achieve a higher growth rate in total assets and sales than the acquired firms but experience a negative industry-adjusted liquidity and are highly levered, suggesting evidence for a growth-resource mismatch or a financial fit between acquirers and their targets.

Human capital, social capital, and innovation: a multi-country study

Abstract: The authors examine the effects of two forms of capital, i.e. human capital and social capital, on innovation at the country level. We use secondary data from the World Development Report on a country's overall human development to test for a relationship between human capital and innovation. We also use previous conceptualizations of social capital as comprising trust, associational activity, and norms of civic behaviour to test for relationships between these indicators of social capital and innovation using data from the World Values Survey. Unlike most previous studies that examined human and social capital within a given country, we develop and empirically test a theoretically grounded model that relates human and social capital to innovation at the societal level across 59 different countries, thus providing a more global view of the role of these two forms of capital in generating value. We find strong support for the positive relationship between human capital and innovation and partial support fo...

35 years of studies on business failure: an overview of the classic statistical methodologies and their related problems

Abstract: Over the last 35 years, business failure prediction has become a major research domain within corporate finance. Numerous corporate failure prediction models have been developed, based on various modelling techniques. The most popular are the classic cross-sectional statistical methods, which have resulted in various ‘single-period’ or static models, especially multivariate discriminant models and logit models. To date, there has been no clear overview and discussion of the application of classic statistical methods to business failure prediction. Therefore, this paper extensively elaborates on the application of (1) univariate analysis, (2) risk index models, (3) multivariate discriminant analysis, and (4) conditional probability models in corporate failure prediction. In addition, because there is no clear and comprehensive analysis in the existing literature of the diverse problems related to the application of these methods to the topic of corporate failure prediction, this paper brings together all problem issues and enlarges upon each of them. It discusses all problems related to: (1) the classical paradigm (i.e. the arbitrary definition of failure, non-stationarity and data instability, sampling selectivity, and the choice of the optimisation criteria); (2) the neglect of the time dimension of failure; and (3) the application focus in failure prediction modelling. Further, the paper elaborates on a number of other problems related to the use of a linear classification rule, the use of annual account information, and neglect of the multidimensional nature of failure. This paper contributes towards a thorough understanding of the features of the classic statistical business failure prediction models and their related problems.