BCG found that the five-year failure risk for US-listed companies fell from around 40% in 2002 to 18% in 2025. The consultancy attributes much of this decline to changes in capital markets, access to financing and the types of businesses entering public markets, rather than a fundamental improvement in corporate resilience.
What does BCG mean by corporate failure?
The study defines failure as a company's delisting from a public stock exchange because of bankruptcy, acquisition or a decision to go private. Delisting does not necessarily mean a business has collapsed or investors have suffered losses.
The five-year failure risk measures the likelihood of a listed company disappearing from an exchange over the subsequent five years. The study covers companies of different sizes and ages, including foreign businesses listed in the US.
Why have corporate failure rates fallen?
BCG identifies three major developments behind the decline.
1. Higher barriers to public listings: The dot-com crash of the early 2000s eliminated many weaker companies that had entered public markets during the technology boom. Subsequently, stricter disclosure requirements, regulatory obligations and litigation risks increased the cost of being publicly listed. The Sarbanes-Oxley Act of 2002 was a significant milestone. The average age of a listed company at the time of its failure increased from 29 years in 2000 to approximately 43 years in 2025.
2. Companies are staying private longer: The growth of private capital markets has allowed businesses to raise funds without going public. Younger companies can remain private during their more vulnerable early years, meaning some failures occur outside the population covered by BCG's research.
3. Low interest rates and government support: After the 2008 financial crisis and during the COVID-19 pandemic, central banks and governments introduced measures to support financial markets and the wider economy. Low borrowing costs and easier refinancing helped financially vulnerable businesses stay afloat without necessarily making their underlying operations stronger.
What causes companies to fail?
BCG identifies three recurring factors that influence corporate failure rates.
- Rising interest rates: Higher borrowing costs can put heavily indebted companies under pressure, particularly when they need to refinance loans. During the early 1980s, when the US Federal Reserve sharply raised interest rates to combat inflation, the average five-year corporate failure risk increased by around 11 percentage points through 1984.
- Financial and industry deregulation: Regulatory changes can intensify competition, trigger acquisitions and accelerate industry consolidation. Developments in US airlines, banking and telecommunications illustrate how changes in market rules can reshape industries and affect corporate survival.
- IPO booms: Periods of heavy IPO activity bring more young and relatively small businesses into public markets. These companies often have less-established revenue streams and fewer financial buffers. BCG found that peaks in IPO activity tended to precede increases in failure risk, including during the 1980s and the dot-com era.
Does a recession automatically increase corporate failures?
Not necessarily. BCG found no meaningful relationship between overall economic cycles and aggregate corporate delisting rates.
The reason is that bankruptcies and acquisitions can move in opposite directions. During downturns, bankruptcies may rise while mergers and acquisitions decline. In stronger markets, bankruptcies may ease while acquisition activity increases.
During the 2008 financial crisis, US annual bankruptcy rates rose from around 1.7% in 2007 to 4.2% in 2009. Meanwhile, merger rates fell from approximately 7.3% to 2.9%. The overall delisting rate barely changed.
This does not mean recessions are harmless. Rather, aggregate delisting figures may fail to capture the full extent of financial pressure on businesses.
Which companies face the highest failure risk?
BCG identifies company age, revenue size and industry as important determinants of corporate survival.
Younger companies are more vulnerable. Five-year failure risk remained above 25% for companies younger than 20 years. It declined as businesses matured, reaching around 13% for companies aged 50 to 60 years. Older businesses can also struggle with legacy technology, rigid processes and rising costs.
Smaller businesses often have fewer customers, limited financing options and less cash to withstand shocks. Larger companies generally benefit from diversified revenue and stronger access to capital, although size does not guarantee survival.
BCG found that the failure-risk gap between the smallest and largest companies widened to around 25 percentage points during some crises, compared with approximately 15 percentage points in calmer periods.
How do industry-specific shocks affect companies?
The same economic shock can have different consequences across industries. BCG's historical analysis highlights three examples:
Real estate companies are particularly exposed to higher borrowing costs because property investments often depend on debt financing. Energy companies can suffer when commodity prices collapse, while technology-driven disruption and changing valuations can destabilise communication services businesses.
These examples underline the importance of assessing a company's exposure to specific risks rather than relying solely on industry-wide averages.
How can companies reduce failure risk?
BCG's findings point to three priorities for businesses seeking to withstand financial and operational shocks:
- Maintain financial flexibility: Preserve cash reserves, borrowing capacity and access to alternative funding sources.
- Assess investments carefully: Evaluate major capital commitments against the possibility of weaker demand, higher interest rates and tighter credit.
- Look for opportunities during crises: Financially stronger companies may be able to acquire assets, expand or strengthen their market position when weaker competitors struggle.