ABSTRACT
This chapter summarises competing normative theories and to indicate how models can be - and have been - developed to test various underlying propositions. Chaos theory is often described in terms of the potential impact of a relatively minor disturbance on a system which has major disequilibrating consequences through a series of knock on effects. Economics, in the form of the theory of the firm and theories of managerial and industrial economics, has relatively little to say directly about corporate bankruptcy, although in global terms it identifies a number of phenomena which can lead to a weakening in a company's market position. The increasing size of a company will tend to reduce risk where the expense of raising capital involves fixed costs. The management and business strategy literature attempts to popularise basic concepts in industrial economics. The management and business strategy literature has identified a series of critical variables which appear to help explain which companies are likely to fail.
