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The corporate bankruptcy prediction literature has traditionally relied on data from public, audited companies. However, the vast majority of firms worldwide are privately-held and lack the same level of scrutiny over their financial statements. As a result, these businesses usually produce less accurate and transparent accounting reports. Our research problem is to address this gap: how stakeholders deal with these less reliable information? Using a novel dataset of 503 private firms that filed for reorganization in Brazil between 2007 and 2020, we found that financial ratios had a significantly lesser effect on explaining default and bankruptcy than what previous research suggested, due in part to the lower information content in the accounting statements within our database. Instead, lenders seem to focus on harder-to-conceal variables, such as collateralizable assets, as well as on institutional factors, like proxies of financial statement quality. There is also concerning evidence that specialized attorneys can "work the system" in favor of distressed companies regardless of their financial fundamentals. Additionally, we found that machine learning models outperformed traditional statistical ones in different sorts of metrics, corroborating the literature on the superior performance of non-linear approaches on datasets having synergistic causality among its features. • With low-quality accounting info, financial ratios had limited impact on bankruptcy. • Instead, lenders prioritize harder-to-conceal variables, such as tangible assets. • Proxies for accounting quality played an important role in explaining bankruptcy. • Specialized attorneys have a dangerous power determining the outcome of proceedings. • Machine learning algorithms performed better than traditional statistical models. [ABSTRACT FROM AUTHOR]

An hermeneutic analysis of the contents of a set of information involving news published by the OGX Petróleo e Gás Participações S.A. company and other financial information are provided to explain the transition from the biggest primary offering of shares registered on the Brazilian market to the bankruptcy petition after just six years of activities. Foregrounded on the concepts of critical hermeneutics with regard to the implementation of the hermeneutic circle, historicity of understanding and the hermeneutic horizon, understanding dialogue and the fusion of horizons, interpretation and authorial intent, different patterns of action among the company´s investors were detected. The relationship between periods of accumulation of positive news and the growth of the market value was evident. Financial data supported growth up to the trend break. However, immediately after the first liabilities, financial information presented a constant fall, but the impact in terms of devaluation was different among investors owing to different modes of comprehension. [ABSTRACT FROM AUTHOR]

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