Determinants of Financial Performance and Bankruptcy Risk Management of Moroccan Firms: A Literature Review

Abstract

This article presents a narrative and critical review of the literature on the relationship between corporate financial performance and default risk. The Moroccan literature displays a precise scientific gap that this review intends to fill.The absence of joint studies on financial performance and default risk, the weakness of the samples used in existing research, and the absence of an integrated model articulating these two dimensions within a unified theoretical framework. In an environment marked by economic uncertainty and the predominance of SMEs, which are often financially fragile, this issue takes on major strategic importance. The review shows that financial performance is a central concept measured through indicators of profitability, liquidity, and solvency, supplemented by stock market ratios. It depends on several key factors, notably capital structure, corporate governance, internal characteristics (size, age, sector), and macroeconomic conditions. At the same time, default risk is defined as a gradual process ranging from financial deterioration to legal bankruptcy. It is influenced by similar factors. Predictive models, ranging from traditional approaches to modern techniques, make it possible to anticipate these crisis situations. The analysis draws on six theoretical frameworks and shows how they interconnect to explain the circular relationship between financial performance and default risk. Finally, the study highlights the limitations of the Moroccan literature and proposes the design of a future empirical model.

JEL Classification: G33, M21

Paper type: Theoretical Research