Analysis of Financial Distress Costs for Innovative Companies

Current research aims to reveal the impact of the specifics of small and medium enterprises on the costs associated with their unsustainable financial position. The sample includes 195 innovative small and medium enterprises of both developed and emerging markets where 38 became bankrupts in 2012-2017. Direct costs of financial distress are evaluated by Ohlson's model and indirect ones - by Altman's model. It was revealed that ROA indicator and R&D expenses have a negative impact on bankruptcy probability and, as consequence, on direct costs of financial distress and Current ratio, Size, Working capital scaled by Total assets, Net income growth, R&D/Total assets and RDC/Total assets has a positive influence on bankruptcy probability. The results show that direct costs are equal to 15,3% of total assets and indirect costs are equal to 32% of total assets.