From Financial Distress to Embedded Corporate Failure: A Systematic Literature Review of Corporate Failure (Revue Internationale des Sciences de Gestion)

Summary

• The review traces corporate failure research from financial prediction models to organisational, relational and institutional approaches.p.2
• It integrates recent developments from 2020 to 2026 on machine learning, explainable AI, textual and multimodal data and global shocks.p.2
• Beaver (1966) showed that some ratios discriminate failing firms years before failure, and Altman (1968) systematised this with a multivariate model.p.3
• Ohlson (1980) introduced a probabilistic approach and Shumway (2001) strengthened the treatment of time.p.3
• The article proposes the concept of embedded failure, a cumulative process in which financial, operational and relational difficulties reinforce one another.p.2
• On 9 March 2023, outflows exceeded $40 billion at the bank used as an illustrative case.p.21

Key insights

1. The conceptual boundaries between financial distress, insolvency, bankruptcy, organisational decline and entrepreneurial failure remain unstable.p.2
2. Predicting that a firm is approaching failure does not necessarily explain why it enters failure.p.3
3. Scopus and Web of Science are the two databases targeted, with a complement for recent publications between 2020 and 2026.p.5
4. Search exports, query histories and inclusion decisions were not attached, so exhaustive execution of the search cannot be attested.p.5
5. Bankruptcy is observable but often captures failure late, since the researcher observes the outcome of an already advanced process.p.9
6. Explainable AI tools show how a model produces a prediction but do not reconstruct the organisational sequence that created the vulnerability.p.11
7. Resources, governance or legitimacy protect a firm only if they are converted into effective capacity for continuity.p.17
8. The concept of embedded failure remains a theoretical construction that requires validation through longitudinal tracking.p.23