Business Failure in Construction Industry

Abstract

Business failure is an extremely disruptive force in the construction industry. The chance of failure for a construction company has increased over the past 10 years. In the past five years, the average age of a construction company at failure has been declining. Construction companies must always be aware of the possibility of business failure. Constant monitoring of their financial condition through the use of financial ratios is key. Overall industry indicators must also be monitored and trends analyzed to determine swings in failure probabilities. This paper investigates the effect of macroeconomic factors on business failures in the construction industry, and develops a model for evaluating and forecasting these failures.