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Bad Luck and Fixed Costs in Personal Bankruptcies

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  • Simmons, Peter

Abstract

This paper applies a model of industrial equilibrium to determine the effects of demand and cost variables on the bankruptcy rate of unincorporated businesses in four industries when there are stochastic cost and demand shocks. The results suggest that different processes are relevant for firms whose fixed costs are associated with fixed capital assets and with working capital. In contrast to earlier work on the corporate sector, real and nominal interest rates have either small, or unexpected, effects. Copyright 1989 by Royal Economic Society.

Suggested Citation

  • Simmons, Peter, 1989. "Bad Luck and Fixed Costs in Personal Bankruptcies," Economic Journal, Royal Economic Society, vol. 99(394), pages 92-107, March.
    • Handle: RePEc:ecj:econjl:v:99:y:1989:i:394:p:92-107
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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. Giorgio Calcagnini & Fabio Farabullini & Germana Giombini, 2014. "The impact of guarantees on bank loan interest rates," Applied Financial Economics, Taylor & Francis Journals, vol. 24(6), pages 397-412, March.
    3. Régis Blazy, 1996. "Mimétisme, erreurs d'anticipation de la demande et risque de défaillance des entreprises industrielles en France : un modèle économétrique à correction d'erreur," Économie et Prévision, Programme National Persée, vol. 125(4), pages 1-18.
    4. Ang, James S. & Fatemi, Ali M., 1997. "Personal bankruptcy costs: Their relevance and some estimates," Financial Services Review, Elsevier, vol. 6(2), pages 77-96.

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