Firm Survival, Uncertainty, and Financial Frictions: Is There a Financial Uncertainty Accelerator?

Abstract

Using a large panel of unquoted UK firms over the period [2000][2001][2002][2003][2004][2005][2006][2007][2008][2009], we examine the impact of firm-specific uncertainty on corporate failures. In this context we also distinguish between firms which are likely to be more or less dependent on bank finance as well as public and nonpublic companies. Our results document a significant effect of uncertainty on firm survival. This link is found to be more potent during the recent financial crisis compared with tranquil periods. We also uncover significant firm-level heterogeneity because the survival chances of bank-dependent and nonpublic firms are most affected by changes in uncertainty, especially during the recent global financial crisis. (JEL E44, F32, F34, G32) * We are grateful to two anonymous referees and Wesley W. Wilson (editor) for very helpful comments and suggestions.

Legal forms, organizational architecture, and firm failure: a large survival analysis of Russian corporations

“…Guariglia et al (2016) confirmed the earlier finding using UK data but for a different period; they maintained that an economic crisis tended to hit bank-dependent and non-exporting firms hard through higher interest rates. This channel of interest rates during a financial crisis was echoed by Boeri et al (2013), who stated that firms that have borrowed more experience larger layoffs, and by Byrne et al (2016), who emphasized that bank-dependent nonpublic firms end up with higher rates of failure due to increased uncertainty.…”

The impact of uncertainty on production relocation: Implications from a regional perspective

“…The recent global economic crisis of 2008 involved a change in the socio‐political and economic environment that was of particular interest in terms of relocation processes (Domański et al, ; Pavlínek, ). This was mainly because the key element characterising the crisis was uncertainty, which conditioned the decisions that managers made (Byrne, Spaliara, & Tsoukas, ; Nelson & Katzenstein, ).…”

On the Real Effect of Financial Pressure: Evidence From Firm‐Level Employment During the Euro‐Area Crisis

“…Bank‐dependent firms rely heavily on bank finance and have limited access to long‐term debt. As banks significantly cut credit to firms during the crisis, we expect that more bank‐dependent firms suffered more (see Santos, ; Byrne, Spaliara and Tsoukas, ). Similarly, smaller firms are associated with higher levels of information asymmetry (Spaliara, ).…”