Evolution of Financial, Non-Financial, and Macroeconomic Predictors in Corporate Bankruptcy: A Comprehensive Review

Abstract

This paper analyzes the evolving interplay over the decades between financial, non-financial and macroeconomic indicators as predictors of corporate insolvency. A key goal is identifying the most frequently employed and validated models incorporating financial metrics, non-variables, and economic factors to gauge bankruptcy risk. This study conducts a rigorous review of 204 scholarly articles published from 1960 to 2024 accessed through databases, i.e. Scopus and Web of Science, using the PRISMA framework. Analysis categorizes predictors into financial, non-financial and macroeconomic variables, examining their relevance over time. Traditional financial ratios such as Debt-to-Equity and Return on Total Assets remain influential. However, management quality, governance, and economic aspects, including growth and interest rates, now complement standard finance models, enabling more nuanced predictions. The research underscores the value of internally and externally focused management systems for averting insolvencies and augmenting standard advice. Results suggest that separately weighing a firm's financial position against non-financial health, political environment, and location allows for more robust forecasting. Looking beyond solely numeric data to incorporate qualitative aspects also forms a more holistic view that benefits managers and policymakers seeking to support economic stability.