The impact of financial structure on firms’ probability of bankruptcy: a comparison across Western Europe convergence regions

The aim of the paper is to investigate the impact of financial structure on firms’ probability of bankruptcy in Western Europe convergence regions. The empirical evidence shows that the financial structure is a key factor explaining firms’ bankruptcy, but while the debt, the cash flow and the profitability ratios are strongly significant in explaining firms’ failure, structure and operational ratios are not relevant factors of bankruptcy. Additional differences arise when we consider the countries separately: while debt and cash flow ratios are significant for bank based economies, they are not significant for market oriented countries.