The determinants of aggregate creditors' voluntary liquidations
This paper investigates the determinants of creditors' voluntary liquidations (CVLs), an area of research that has received comparatively scant attention in the literature despite the fact that, at least in the UK, this form of insolvency has consistently comprised the majority of company failures. It develops an equilibrium correction model to explain variations in the aggregate number of creditors' voluntary liquidations in England and Wales between 1963 and 1995. This is then subjected to out-of-sample testing over the subsequent ten-year period. The results indicate that in both the short-run and the long-run, changes in the level of liquidations can be explained by two main explanatory variables namely: the nominal after-tax cost of borrowing and changes in real economic activity. In addition, confirmatory evidence is provided of the dampening effect of the 1986 Insolvency Act on the number of liquidations. The model retains its forecasting accuracy in the out-of-sample period although there is possibly some preliminary evidence of a further mitigating effect associated with the Enterprise Act 2002.
|Date of creation:||09 Dec 2011|
|Publication status:||Published in Applied Economics, Taylor & Francis (Routledge), 2011, 45 (10), pp.1321-1330. <10.1080/00036846.2011.617695>|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00762895|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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