IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00762895.html
   My bibliography  Save this paper

The determinants of aggregate creditors' voluntary liquidations

Author

Listed:
  • Peter Lloyd Jones

    () (Accounting Finance and Economics - Robert Gordon University)

Abstract

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.

Suggested Citation

  • Peter Lloyd Jones, 2011. "The determinants of aggregate creditors' voluntary liquidations," Post-Print hal-00762895, HAL.
  • Handle: RePEc:hal:journl:hal-00762895
    DOI: 10.1080/00036846.2011.617695
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00762895
    as

    Download full text from publisher

    File URL: https://hal.archives-ouvertes.fr/hal-00762895/document
    Download Restriction: no

    References listed on IDEAS

    as
    1. Fabling, Richard & Grimes, Arthur, 2005. "Insolvency and economic development: Regional variation and adjustment," Journal of Economics and Business, Elsevier, vol. 57(4), pages 339-359.
    2. Dimitras, A. I. & Zanakis, S. H. & Zopounidis, C., 1996. "A survey of business failures with an emphasis on prediction methods and industrial applications," European Journal of Operational Research, Elsevier, vol. 90(3), pages 487-513, May.
    3. S. Balcaen & H. Ooghe, 2004. "35 years of studies on business failure: an overview of the classical statistical methodologiesand their related problems," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/248, Ghent University, Faculty of Economics and Business Administration.
    4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    5. Kearns, Allan, 2003. "Corporate Indebtedness and Liquidations in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 91-105, August.
    6. Young, Garry, 1995. "Company Liquidations, Interest Rates and Debt," The Manchester School of Economic & Social Studies, University of Manchester, vol. 63(0), pages 57-69, Suppl..
    7. Jia Liu, 2004. "Macroeconomic determinants of corporate failures: evidence from the UK," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 939-945.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Social Sciences & Humanities;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00762895. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.