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A long-run survival analysis of corporate liquidations in Ireland

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  • Robert Kelly

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  • Eoin Brien

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  • Rebecca Stuart

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Abstract

This paper examines the role of credit and the macroeconomy in small and medium enterprise (SME) distress during a prolonged economic downturn. Specifically, we estimate the determinants of SME distress in Ireland during the severe financial and economic crisis which began in 2007/2008. We use a measure of distress, insolvencies, which captures both bank and non-bank forms of credit. We conduct a survival analysis of insolvent liquidations and find that, controlling for firm location and economic activity, both variables capturing a build-up of stress in the macroeconomy and those capturing bank credit standards and availability throughout the cycle are determinants of firm survival. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Robert Kelly & Eoin Brien & Rebecca Stuart, 2015. "A long-run survival analysis of corporate liquidations in Ireland," Small Business Economics, Springer, vol. 44(3), pages 671-683, March.
  • Handle: RePEc:kap:sbusec:v:44:y:2015:i:3:p:671-683
    DOI: 10.1007/s11187-014-9605-1
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    References listed on IDEAS

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    1. Glenn Hoggarth & Steffen Sorensen & Lea Zicchino, 2005. "Stress tests of UK banks using a VAR approach," Bank of England working papers 282, Bank of England.
    2. Tristan Boyer & Régis Blazy, 2014. "Born to be alive? The survival of innovative and non-innovative French micro-start-ups," Small Business Economics, Springer, vol. 42(4), pages 669-683, April.
    3. Kearns, Allan, 2003. "Corporate Indebtedness and Liquidations in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 91-105, August.
    4. Martina Lawless & Fergal McCann, 2013. "Determinants of Default: Evidence from a Sector-level Panel of Irish SME Loans," The Economic and Social Review, Economic and Social Studies, vol. 44(4), pages 473-488.
    5. M. Tudela & G. Young, 2005. "A Merton-Model Approach To Assessing The Default Risk Of Uk Public Companies," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 8(06), pages 737-761.
    6. Campello, Murillo & Graham, John R. & Harvey, Campbell R., 2010. "The real effects of financial constraints: Evidence from a financial crisis," Journal of Financial Economics, Elsevier, vol. 97(3), pages 470-487, September.
    7. Casey, Eddie & O'Toole, Conor, 2013. "Bank-lending constraints and alternative financing during the financial crisis: Evidence from European SMEs," Papers WP450, Economic and Social Research Institute (ESRI).
    8. Castrén, Olli & Dées, Stéphane & Zaher, Fadi, 2008. "Global macro-financial shocks and expected default frequencies in the euro area," Working Paper Series 875, European Central Bank.
    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. Borio, Claudio, 2014. "The financial cycle and macroeconomics: What have we learnt?," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 182-198.
    11. Gertjan W. Vlieghe, 2001. "Indicators of fragility in the UK corporate sector," Bank of England working papers 146, Bank of England.
    12. Hamerle, Alfred & Liebig, Thilo & Scheule, Harald, 2004. "Forecasting Credit Portfolio Risk," Discussion Paper Series 2: Banking and Financial Studies 2004,01, Deutsche Bundesbank.
    13. Lawless, Martina & McCann, Fergal & O'Toole, Conor, 2013. "The importance of banks in SME financing: Ireland in a European context," Economic Letters 05/EL/13, Central Bank of Ireland.
    14. Agarwal, Rajshree & Audretsch, David B, 2001. "Does Entry Size Matter? The Impact of the Life Cycle and Technology on Firm Survival," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 21-43, March.
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    Cited by:

    1. Slaymaker, Rachel & O'Toole, Conor & McQuinn, Kieran & Fahy, Mike, 2018. "Monetary policy normalisation and mortgage arrears in a recovering economy: The case of the Irish residential market," Papers WP613, Economic and Social Research Institute (ESRI).
    2. Guimarães Barbosa, Evaldo, 2016. "The relationships between, on the hand, size, growth and age of the firm and, on the other hand, small business survival – a constructive critique and a proposal of a new framework," MPRA Paper 72111, University Library of Munich, Germany.
    3. McInerney, Niall, 2019. "Macroprudential Policy, Banking and the Real Estate Sector," MPRA Paper 91777, University Library of Munich, Germany.
    4. Bergin, Adele & Conroy, Niall & Garcia Rodriguez, Abian & Holland, Dawn & McInerney, Niall & Morgenroth, Edgar & Smith, Donal, 2017. "COSMO: A new COre Structural MOdel for Ireland," Papers WP553, Economic and Social Research Institute (ESRI).

    More about this item

    Keywords

    Ireland; Corporate liquidations; Firm default; Survival analysis; C25; D20; L0; L26;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D20 - Microeconomics - - Production and Organizations - - - General
    • L0 - Industrial Organization - - General

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