Proximity and Financial Distress : evidence from Debt Renegotiations in Italian SMEs

Purpose: This study examines whether SMEs located in municipalities that favor proximity to stakeholders are more likely to survive financial distress through debt restructuring. Drawing on the resourcebased view of the firm, we hypothesize that proximity, as a form of social capital, is a crucial asset in times of crisis. Design/methodology/approach: This study employs a multivariate logistic regression to analyze a sample of Italian private SMEs that underwent formal debt renegotiation between 2017 and 2019. Findings: The results of our analyses show that proximity significantly aids in resolving financial distress through debt restructuring. Research limitations/implications: This study is limited to a single country. Future research could extend the analysis to multiple countries to explore the influence of different legal frameworks on the results. Practical implications: This study provides valuable insights for distressed companies, highlighting the need to invest in stakeholder

relationships to reduce the risk of failure. Originality/value: This study is the first to examine the proximity dimension of social capital in the context of financial distress, highlighting the importance of stakeholder support as a vital intangible resource for recovery. [Publisher's text]