This paper investigates the determinants of business failure in particular historical circumstances of Slovenia, attempting to answer two questions: if the occurrence of bankruptcy can be explained by technical and cost efficiency, measured by data envelopment analysis (DEA), and what the time lag is in which technical and cost efficiency effect bankruptcy. The findings of logistic regression allow the conclusion that efficiency, measured by the DEA indicators, adds additional explanatory power to predicting the business failure of small firms in Slovenia from 2001 to 2004, as well as business performance by sale market, market power, and location of a firm.
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