Impact of Effective Generic Business Strategies on Probability of Default: A Study of NSE Listed Firms
Meena Sharma & Sakshi Khurana
What the paper says
The aim of the current study is to examine the impact of generic business strategies (GBS) on default risk for Indian firms listed on the National Stock Exchange. This study employs a distance-to-default model to compute default risk and GBS, which are measured through Porter’s framework. The relationship between GBS and the probability of default is derived through panel data regression analysis for the period 2008–2009 to 2021–2022. The results support the hypothesis and show a positive relationship between cost leadership and the distance-to-default model. The findings indicate that companies employing a cost leadership strategy tend to have sound financial health, which makes them less prone to default risk. The results show practical implications for financial institutions, creditors, and investors who can check the strategic positioning of a firm before evaluating and arriving at the credit rating, lending, and investment decisions. Based on the findings of this study, investors can provide funds to invest in a firm that implements GBS effectively to ensure high investment returns and fewer credit defaults. The study is expected to contribute to default risk literature by providing evidence that GBS indicators can be experimented for incorporation into new default risk prediction models.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.