Kerimov, PavloZymovets, Vladyslav2023-02-242023-02-242021Kerimov P. Quasi-Risk and Fraudulent Financing Models: The Case of Firms with Negative Equity in Ukraine / Pavlo Kerimov, Vladyslav Zymovets // Economic Studies (Ikonomicheski Izsledvania). - 2021. - Vol. 30 (8). - Р. 48-68.0205-3292https://ekmair.ukma.edu.ua/handle/123456789/24772In this paper, we aim to explore and explain the rise in the number and magnitude of negative balance equity (NBE) cases in Ukraine over the last decade. We systematize existing approaches to interpret NBE and scrutinize the interrelation between zombie firms and firms with NBE. We use an original database of 212 big Ukrainian firms to study basic dynamics of the number, volume and longevity of NBE cases in 2006-2019. Our findings indicate that a sufficiently large share of Ukrainian NBE cases does not appear to fully adhere to any of the existing hypotheses, and their number and longevity tend to be abnormally high. We offer two possible explanations for such a phenomenon. The first is a quasi-risk financing model, based on substituting equity with debt financing from associated firms usually registered in tax heavens. The second one is a fraudulent financing model, based on the exploitation of legal and political backing discrepancy between debtor and creditor. The use of said models is indicated by positive operational cash flow in conjunction with the continued business activity of NBE firms that otherwise qualify for bankruptcy. We suggest the Value Gap Ratio as a rule of thumb indication of these financing models being used.encorporate financecapital structurenet equitybankruptcyzombie firms JEL: G32G33articleArticle