Company Failure in the Construction Industry: A Critical Review and a Future Research Agenda

Abstract

Company failure is not only extremely disruptive to an industry but may also cause significant rippling effects in an economy. Construction companies are vulnerable to bankruptcy due to the fragmented nature of the industry, high competition, the high uncertainty and risk involved, and considerable fluctuations in construction volume. It is important to recognise any potential company failures at the earliest opportunity. While bankruptcy prediction has long been regarded as a critical topic in the accounting and finance sectors, this research topic is still under-explored in the context of the construction industry. This paper aims to provide a synthesis of the previous business failure prediction models for construction companies and put forward a future agenda in this research area. Common causes of construction company failures are also reviewed. Using the results from the proposed research, it is anticipated that construction companies will be better able to prevent business failure and this should be relevant to the current needs of the construction industry and significant to the society.

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