What is Risk of Bankruptcy

The latest global economic and financial crisis has been a litmus test for companies, especially for SMEs. These companies have had to demonstrate their ability to be resilient, surviving first and then recovering. This chapter studies the role of family ownership in the survival and recovery of SMEs during a stressful event. From a perspective based on the complementarity or substitutability of goals that family firms pursue, the authors propose that family ownership has a positive effect on survival but a negative effect on recovery. Furthermore, they propose that the risk of bankruptcy before a crisis moderates the relationship between family ownership and survival. Hypotheses have been tested with a dataset of 3,133 Spanish manufacturing MEs finding evidence for the positive role of family ownership in survival and for the moderating effect of previous bankruptcy risk. The empirical data confirms good news for family-owned firms.