@article{Platt:50146,
      recid = {50146},
      author = {Platt, Harlan D. and Platt, Marjorie B.},
      title = {Understanding Differences Between Financial Distress and  Bankruptcy},
      journal = {Review of Applied Economics},
      address = {2006},
      number = {1076-2016-87135},
      pages = {17},
      year = {2006},
      abstract = {For the most part, research purporting to address the  issue of financial distress has actually studied samples of  bankrupt companies. Financial distress and bankruptcy are  different. In contrast, this paper starts with a sample of  companies that are financially distressed but not yet  bankrupt. The sample was obtained by screening the  Compustat industry database with a three-tiered  identification system. The screen bifurcated companies into  financially and non-financially distressed groups. A  multi-tiered screen reduces the incidence of mistakenly  identifying a non-distressed company as financially  distressed. The paper then compares factors indicating the  likelihood of future bankruptcies to those indicating  future financial distress. To do this, an early warning  financial-distress model was developed and compared to a  methodologically similar existent model of bankruptcy. The  final financial distress model included only one variable  present in the bankruptcy model and four new variables. The  limited overlap of explanatory factors between the models  questions the similarity of financial distress and  bankruptcy. Statistical tests lend support to the notion  that the bankruptcy process is not just a continuation of a  downward spiraling cycle of financial distress. Our  hypothesis is that financial distress is something that  happens to companies as a consequence of operating  decisions or external forces while bankruptcy is something  that companies choose to do to protect their assets from  creditors.},
      url = {http://ageconsearch.umn.edu/record/50146},
      doi = {https://doi.org/10.22004/ag.econ.50146},
}