Short- and Long-term Relationship between Government Procurement and Brazilian Business Bankruptcy Rates

Objective: this article analyzes the relationship between government procurements and the bankruptcy rates of Brazilian enterprises. Theoretical approach: the literature on Brazilian micro- and small enterprises (MSEs) indicates a high incidence of bankruptcies, with multiple causes interacting in a complex causal chain. While most studies have focused only on internal determinants (such as managerial and firm-specific attributes), external factors, including macroeconomic conditions and incentive policies, are also recognized as relevant. Methods: to contribute to this discussion, autoregressive distributed lag (ARDL) models were estimated using monthly data from January 2005 to August 2022. Results: the findings indicate an association between government procurements and a reduction in the bankruptcy rates of MSEs in the long term; however, this effect was not observed in larger enterprises. Conclusions: the results highlight the importance of creating policies that provide differentiated treatment for MSEs in public procurement, as established in Brazil through the Microand Small Business National Act.