Analysis of the legal, financial, and organizational determinants of business failure: A case of an emerging market

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Abstract

The research examines the financial, legal, and organizational factors of business failure in Moroccan companies. It highlights the importance of understanding these determinants for formulating effective preventive measures and supporting business stability. The literature review explores the definition of business failure in Moroccan companies, legal determinants such as the legal framework and bankruptcy procedures, and financial determinants such as financial ratios and factors specific to Moroccan companies (Sami, 2013). The research methodology proposes using financial, legal, and organizational data, along with statistical analyses, to obtain relevant results using the structural equation modeling (SEM) method through SmartPLS 3.3.2 software. It detects a significant involvement of legal, financial, and organizational factors. The article acknowledges the limitations in analyzing the determinants of business failure in Moroccan companies due to incomplete and unreliable data. It emphasizes the need for in-depth studies on specific factors and the importance of external factors such as the economic and political context. Legal, financial, and organizational determinants are identified as important, but a broader consideration of internal and external factors is recommended to better understand business failure. Extensive research could lead to more effective preventive measures and interventions.

Keywords: Business Failure, Structural Equation Modeling, SEM, Financial Determinants, Organizational Factors, Moroccan Companies

Authors’ individual contribution: Conceptualization — N.A.; Methodology — M.K.; Investigation — N.A. and M.K.; Resources — N.A.; Writing — N.A. and M.K.; Supervision — M.K.; Funding Acquisition — N.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C30, C38, G32, G33, O55

Received: 17.08.2024
Revised: 20.12.2024; 03.02.2025; 24.03.2025
Accepted: 11.04.2025
Published online: 15.04.2025

How to cite this paper: Arzou, N., & Kobiyh, M. (2025). Analysis of the legal, financial, and organizational determinants of business failure: A case of an emerging market. Corporate Law & Governance Review, 7(2), 50–62. https://doi.org/10.22495/clgrv7i2p5