This paper studies firm failure causes in the forest sector and is based on a thorough analysis of 50 bankruptcy cases from Estonia. The results indicate that in the forest sector in more than a half of the occasions firm failure was triggered by either only internal or external reasons. Namely, for 26% of cases bankruptcy was caused by only internal reasons, for 30% by only external reasons and for 44% by both reasons. The most common causes noted in court judgments were concentration on only a few customers (resulting in cessation of cooperation or unpaid claims), unfavourable market developments (drop in demand or in product prices and increase in competition or in input factor prices), lengthy unprofitable activities, lack of working capital, too low share of equity or inability to find additional financial resources, and management errors.

Keywords: forest sector, firm failure, bankruptcy causes.