Companies Bankruptcy Theories and Introducing a New Theory

This paper has ofered a brief look at various bankruptcy theories and introduced a new theory for explaining corporate Failure. The proposition here is that bankruptcy results from something more specific and recognizable than managerial incompetence.Bankruptcy is The result of a corporaton’s Failure to adequately satisfy the demands of the various parties which have a stake in the firm, some interest in the firm’s sucess. These groups includc stockholders, creditors, employees, suppliers, customers, government, and management. Managemant is given the assignment of controlling these various constituencies; it must satisfy the demands to extent that no group of stokeholders takesdefensive action which impairs the firms ability to survive. The interests of each party and possible defensive actions were outlined as were some Financial ratios which might be useful in signalling deterioration of cantrol. At The end We suggest some recomendationsfor future reserch.