Unveiling risk patterns through an in-depth analysis of Slovak company defaults (2014–2018)

Abstract

This article comprehensively analyses Slovak company defaults between 2014 and 2018, seeking to identify non-financial risk patterns across different sectors, regions, company ages, and legal structures. The study encompasses 168,252 Slovak companies, of which 941 experienced defaults. This paper employs descriptive analysis to outline and summarize pivotal characteristics of the data, thereby understanding the overarching trends in company defaults. This method enables for a more informed approach to develop risk mitigation strategies. The main objective of this article is to unveil the non-financial risk patterns among defaulted companies. The scope of this analysis includes companies operating within Slovakia, offering a comprehensive view of the default dynamics within this geographical and economic context. Our findings point to a gradual decrease in company defaults over the study period. Bratislava region stood out as having the highest number of defaulted companies; however, when looking at the proportion of bankruptcies, Kosice region exhibited the highest percentage of business failures. An interesting age-related pattern emerged from our data, showing a significant concentration of defaults among companies aged between 3 to 9 years. Yet, when defaults are examined as proportions within each age group, companies aged 18 to 22 years demonstrated the highest bankruptcy rates. Industry-wise, the construction sector recorded the highest number of defaults, aligning with the general vulnerability of joint stock companies, which showed a higher likelihood of defaulting at older ages. On the contrary, limited liability companies tended to default more frequently at younger stages of their lifecycle. Notably, the information technology sector emerged as the industry with the lowest default rates, highlighting its relative financial stability compared to other sectors.