Predicting the development of decline in construction companies

The main goal of this research is to develop a model that company managers can use to evaluate the condition of their company to see whether the company is healthy, whether decline is developing, or whether decline has reached an advanced stage. The early detection of decline is expected to trigger corrective measures to prevent further decline and eventual failure. This research argues that the early causes of decline of construction companies lie in the environmental conditions and the organizational, human capital and strategic characteristics of a company. This research gives guidance to executives of construction companies about characteristics that are conducive to decline and eventually failure. It also provides a tool for the use of construction executives other than financial ratios that allows them to monitor the condition of their organization. In this research it is argued that construction company decline goes through four phases. These are decline development, decline recognition, decline response, and decline outcome. The data used to determine the non-financial causes of decline of a construction organization are collected by means of questionnaire surveys. The first survey determines the relative significance of construction company decline causes as perceived by industry professionals. In the second survey, the Mann-Whitney test is used to determine the differences between bankrupt and non-bankrupt companies and Multinomial Logistic Regression analysis is used to develop a model to rate the condition of a construction company vis-à-vis decline. In this research the theoretical foundations of the early “decline” phenomenon in construction companies have been set and a statistical prediction model has been developed which allows construction executives to assess the condition of their company at any time.