The characteristics of changes in construction companies to become insolvent by size following macroeconomic fluctuations

In the present study, individual groups of construction companies were first classified according to size, and then the processes of changes needed for them to become insolvent were examined utilizing KMV models. Another objective of the present study was to analyze the relationship between macroeconomic fluctuations and the changes needed for construction companies to become insolvent (based on their size). In the present study, construction companies were classified by size, and the relationship between the changes required for insolvency of construction companies and macroeconomic fluctuations was analyzed. To analyze the relationship, vector error correction models (VECMs) were constructed. Through the analysis, as perceived intuitively, large companies were determined to be financially sounder than small and medium sized companies. In the case of small and medium sized companies, the trend of changes needed to become insolvent was extremely insensitive to economic fluctuations. That is, it was identified that in the case of relatively small companies, poor financial environments were constantly maintained. Large companies were generally more financially stable, but they responded very sensitively to business. Consequently, their financial conditions deteriorated more rapidly than small or medium sized companies when rapid economic fluctuations occurred.