When the coronavirus pandemic hit, numerous companies, many of which had survived for more than 50 or even 100 years, had witnessed massive falls and filed for bankruptcy.
Let’s look through data of 2000-2019. We define midsize businesses as those in the middle 40% of all companies placed on the U.S. stock exchanges. This is done annually based on their market value at the end of the previous year.
Moreover, data suggests that a perfect storm has been brewing for midsize companies over the last 50 years. In every successive ten years since 1970–79, the annual growth rates of assets, sales, and profits have been dipping for midsize companies, which are struggling to earn profits.
Unfortunately, we don’t yet have financial reports for 2020. It typically needs three months to prepare and audit the financial statements. But, we have another sign of financial distress: the number of bankruptcies filed by midsize companies. For this data, we rely on the UCLA-LoPucki Bankruptcy Research Database. It tracks bankruptcies filed by companies with assets surpassing $100 million in 1980 dollars (around $310 million in today’s dollars). The database also includes economically powerful midsize companies.
The largest number of annual bankruptcy filings between 2010 and 2019 was 32
Another essential thing to mention is that the largest number of annual bankruptcy filings between 2010 and 2019 was 32 in 2016. The median was 11 during the decade, while averages stood at 13.2 per year. That number surged to 43 in 2020. This was a 226% gain from the annual average and a 291% boost over the median.
Despite its low-interest rates and stable economic environment, the most recent decade witnessed the slowest growth among midsize companies and a continual deterioration of their financial performance. It’s evident that the pandemic made this trend even worse. It shook their core companies that had survived harder economic hits throughout the last century.
COMMENTS