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The research of the Polytechnic found a spatial relationship in the business environment in the diffusion of financial instability, which affected 17% of Murcian SMEs between 2011 and 2013

'When the beards of your neighbor see shaving, put yours to soak', the proverb serves to summarize one of the conclusions of the thesis 'Spatial analysis of the effects of contagion of business failure', defended today at the Polytechnic University of Cartagena (UPCT) and that recommends a particularly prudent business management if difficulties are observed in the neighboring companies.

"Our regression model proves that the probability of failure increases if companies in the area increase their indebtedness and decrease if profitability increases in the business neighborhood", explains Fernando López, director along with Mari Luz Maté of the doctoral thesis of Christian Rodríguez Fuentes , alumnus of the degree in Business Administration and Management and the Master of Accounting and Corporate Finance of the UPCT.

The researchers of the Faculty of Business Sciences of the UPCT analyzed the accounts of 2,710 small and medium-sized companies in the municipality of Murcia during the central years of the economic crisis, between 2011 and 2013, finding that 17% of the Murcian companies, in particular 448, they were in a situation of failure, defined as having negative net worth for three consecutive years.

The thesis shows that the probabilities of failure also increase if there are firms from the sectors where they are most in crisis and of the most vulnerable typology among the business neighborhood.

The data indicate that the recession affected hotel and catering companies, with a 27% failure rate, real estate (21%) and technical activities (17%), while better resisting those dedicated to transportation (15%) and trade (12%).

Likewise, the impact of the crisis was unequal according to the size of Murcian companies.

The failure rate was 18% in microenterprises with less than 10 employees, and only 8% in small companies with between 10 and 50 employees and 11% in medium companies with staff of between 50 and 250 employees.

And mature companies, more than 15 years old, also survived more than young companies.

The thesis, which demonstrates the incidence of external factors on business results, is also useful for the management of credit demand by banking institutions.

Source: UPCT