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Company Liquidations, Interest Rates and Debt

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  • Young, Garry

Abstract

This paper examines the relationship between interest rates and company failure. It argues that the response of insolvencies to changes in interest rates depends on the composition of company debt and whether the change in interest rates is expected or unexpected, real or nominal. It shows that when company debt is at variable interest rates, companies are especially vulnerable to unanticipated changes in real interest rates. Evidence is presented which shows that such changes are a major factor in explaining the aggregate company liquidation rate in England and Wales. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Young, Garry, 1995. "Company Liquidations, Interest Rates and Debt," The Manchester School of Economic & Social Studies, University of Manchester, vol. 63(0), pages 57-69, Suppl..
    • Handle: RePEc:bla:manch2:v:63:y:1995:i:0:p:57-69
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    Cited by:

    1. Hunter, John & Isachenkova, Natalia, 2006. "Aggregate economy risk and company failure: An examination of UK quoted firms in the early 1990s," Journal of Policy Modeling, Elsevier, vol. 28(8), pages 911-919, November.
    2. Natalia Isachenkova & John Hunter, 2002. "A Panel Analysis Of UK Industrial Company Failure," Working Papers wp228, Centre for Business Research, University of Cambridge.
    3. Natalia Isachenkova & Melvyn Weeks, 2009. "Acquisition, Involvency and Managers in UK Small Companies," Working Papers wp390, Centre for Business Research, University of Cambridge.
    4. Philip Bunn & Victoria Redwood, 2003. "Company accounts based modelling of business failures and the implications for financial stability," Bank of England working papers 210, Bank of England.
    5. A. Bhattacharjee & C. Higson & S. Holly & P. Kattuman, 2009. "Macroeconomic Instability and Business Exit: Determinants of Failures and Acquisitions of UK Firms," Economica, London School of Economics and Political Science, vol. 76(301), pages 108-131, February.
    6. Harada, Nobuyuki & Kageyama, Noriyuki, 2011. "Bankruptcy dynamics in Japan," Japan and the World Economy, Elsevier, vol. 23(2), pages 119-128, March.
    7. Bhattacharjee, Arnab & Hany, Jie, 2010. "Financial Distress in Chinese Industry: Microeconomic, Macroeconomic and Institutional Infuences," SIRE Discussion Papers 2010-53, Scottish Institute for Research in Economics (SIRE).
    8. M. A. Lagesh & Maram Srikanth & Debashis Acharya, 2018. "Corporate Performance during Business Cycles: Evidence from Indian Manufacturing Firms," Global Business Review, International Management Institute, vol. 19(5), pages 1261-1274, October.
    9. Bhattacharjee, Arnab & Han, Jie, 2014. "Financial distress of Chinese firms: Microeconomic, macroeconomic and institutional influences," China Economic Review, Elsevier, vol. 30(C), pages 244-262.
    10. Peter Lloyd Jones, 2011. "The determinants of aggregate creditors' voluntary liquidations," Post-Print hal-00762895, HAL.
    11. Khoja, Layla & Chipulu, Maxwell & Jayasekera, Ranadeva, 2019. "Analysis of financial distress cross countries: Using macroeconomic, industrial indicators and accounting data," International Review of Financial Analysis, Elsevier, vol. 66(C).
    12. Arnab Bhattacharjee & Chris Higson & Sean Holly & Paul Kattuman, 2007. "Macroeconomic Conditions and Business Exit: Determinants of Failures and Acquisitions of UK Firms," CDMA Working Paper Series 200713, Centre for Dynamic Macroeconomic Analysis.
    13. Barnett, Alina & Groen, Jan J J & Mumtaz, Haroon, 2010. "Time-varying inflation expectations and economic fluctuations in the United Kingdom: a structural VAR analysis," Bank of England working papers 392, Bank of England.
    14. Ran Sharabany, 2004. "Business Failures and Macroeconomic Risk Factors," Bank of Israel Working Papers 2004.06, Bank of Israel.
    15. Salman, A. Khalik & von Friedrichs, Yvonne & Shukur, Ghazi, 2009. "Macroeconomic Factors and Swedish Small and Medium-Sized Manufacturing Firm Failure," Working Paper Series in Economics and Institutions of Innovation 185, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    16. Gertjan W. Vlieghe, 2001. "Indicators of fragility in the UK corporate sector," Bank of England working papers 146, Bank of England.

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