Proximity and Financial Distress: Evidence from Debt Renegotiations in Italian SMEs

Journal title FINANCIAL REPORTING
Author/s Carlotta Magri, Federico Bertacchini, Gianluca Gabrielli
Publishing Year 2025 Issue 2025/2
Language English Pages 28 P. 221-248 File size 266 KB
DOI 10.3280/fr202519806
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Purpose: This study examines whether SMEs located in municipalities that favor proximity to stakeholders are more likely to survive financial distress through debt restructuring. Drawing on the resource-based view of the firm, we hypothesize that proximity, as a form of social capital, is a crucial asset in times of crisis. Design/methodology/approach: This study employs a multivariate logistic regres-sion to analyze a sample of Italian private SMEs that underwent formal debt rene-gotiation between 2017 and 2019. Findings: The results of our analyses show that proximity significantly aids in re-solving financial distress through debt restructuring. Research limitations/implications: This study is limited to a single country. Future research could extend the analysis to multiple countries to explore the influence of different legal frameworks on the results. Practical implications: This study provides valuable insights for distressed compa-nies, highlighting the need to invest in stakeholder relationships to reduce the risk of failure. Originality/value: This study is the first to examine the proximity dimension of so-cial capital in the context of financial distress, highlighting the importance of stake-holder support as a vital intangible resource for recovery.

Keywords: proximity, financial distress, debt restructuring, social capital

Jel codes: M40, K20, R10

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Carlotta Magri, Federico Bertacchini, Gianluca Gabrielli, Proximity and Financial Distress: Evidence from Debt Renegotiations in Italian SMEs in "FINANCIAL REPORTING" 2/2025, pp 221-248, DOI: 10.3280/fr202519806