The European Commission’s Directorate General for Competition has published an independent report by Oxera examining the impact of financial distress on failing firms’ output and employment, as well as the broader consequences of distress at the industry and regional level. The objective of the study is to better understand the drivers and implications of financial distress, and to inform what might happen to large European firms in financial difficulty in the absence of state support.

The Oxera study aims to inform the European Commission and other stakeholders what might happen to a firm seeking approval of restructuring aid in the absence of such aid. This is an important contribution to the evidence on how to target state interventions more effectively in the future, and to what investors, creditors and other stakeholders might expect after the onset of distress. The Oxera study examines more than 1,300 distress cases of large firms in Europe and consolidates new empirical findings with research to date. It shows the circumstances under which firms in financial difficulty have survived without recourse to state capital, and where the consequences for a firm’s performance, activity and jobs have been more severe, including liquidation.

The study helps to identify markets and cases where help might be particularly needed, and provides a wide range of insights into the process of financial distress and how firms recover from financial difficulty. This insight is relevant to all cases of distress and restructuring programmes as it offers informed benchmarks for the analysis of distress, from the evolution of the performance of firms in financial difficulty to the valuation of distressed debt.

To read more about Oxera's work on State Aid, please click here.

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