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The Exchange Rate and Company Failure in a Macro-Micro Model of the UK Company Sector

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  • Goudie, A W
  • Meeks, G

Abstract

A macro-micro model is presented which is used to predict company failure. It bridges the gap between previous macroeconomic models and the microeconomic approach to company failure in the finance literature: it can trace the probable effects of exogenous macroeconomic shocks upon the finances and the viability of individual members of the company sector. A series of simulation exercises using this model quantifies the impact of variations in the exchange rate upon the failure rate among the top one hundred U.K. companies. This impact is shown to be substantial, asymmetric, and at times nonlinear. Copyright 1991 by Royal Economic Society.

Suggested Citation

  • Goudie, A W & Meeks, G, 1991. "The Exchange Rate and Company Failure in a Macro-Micro Model of the UK Company Sector," Economic Journal, Royal Economic Society, vol. 101(406), pages 444-457, May.
  • Handle: RePEc:ecj:econjl:v:101:y:1991:i:406:p:444-57
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    Cited by:

    1. Ugur, Mehmet & Trushin, Eshref & Solomon, Edna, 2016. "Inverted-U relationship between R&D intensity and survival: Evidence on scale and complementarity effects in UK data," Research Policy, Elsevier, vol. 45(7), pages 1474-1492.
    2. 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.
    3. Natalia Isachenkova & John Hunter, 2002. "A Panel Analysis Of UK Industrial Company Failure," Working Papers wp228, Centre for Business Research, University of Cambridge.
    4. Layla Khoja & Maxwell Chipulu & Ranadeva Jayasekera, 2016. "Analysing corporate insolvency in the Gulf Cooperation Council using logistic regression and multidimensional scaling," Review of Quantitative Finance and Accounting, Springer, vol. 46(3), pages 483-518, April.
    5. C. Higson & S. Holly & P. Kattuman & S. Platis, 2004. "The Business Cycle, Macroeconomic Shocks and the Cross-Section: The Growth of UK Quoted Companies," Economica, London School of Economics and Political Science, vol. 71(281), pages 299-318, May.
    6. repec:eee:finana:v:55:y:2018:i:c:p:196-208 is not listed on IDEAS
    7. Ugur, Mehmet & Trushin, Eshref & Solomon, Edna, 2015. "Inverted-U relationship between innovation and survival: Evidence from firm-level UK data," MPRA Paper 68010, University Library of Munich, Germany, revised 10 Nov 2015.
    8. 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.
    9. 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.
    10. 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.
    11. Trushin, Eshref & Ugur, Mehmet, 2018. "Ecosystem complexity, firm learning and survival: UK evidence on intra-industry age and size diversity as exit hazards," Greenwich Papers in Political Economy 19095, University of Greenwich, Greenwich Political Economy Research Centre.
    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. repec:wut:journl:v:3:y:2017:p:81-97:id:1310 is not listed on IDEAS
    14. Lillian Cheung & Amnon Levy, 1998. "An integrative analysis of business bankruptcy in Australia," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 22(2), pages 149-167, June.
    15. 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).

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