Modelling the impact of macroeconomic variables on aggregate corporate insolvency: case of Croatia

Abstract

The majority of research papers dealing with corporate failure and insolvency in transition countries use a combination of financial ratios in investigating corporate failures, i.e., the microeconomic approach. By relying solely on the microeconomic approach, it is not possible to completely capture the complexity of business operations. In recent years, there has been a growing interest in exploring the predictive power of macroeconomic variables in forecasting insolvencies. As the macroeconomic approach has been applied mainly in the analysis of developed economies, this article investigates the influence of macroeconomic variables on aggregate corporate insolvency in Croatia, using the vector error-correction model (VECM) for the period 2000-2011. The results have shown a long-run dynamic connection between the corporate insolvency rate and the rate of unemployment while corporate credits, long-term interest rates and industrial production have a short-term effect on the corporate insolvency rate.

Macroeconomic Determinants of Corporate Failures. Evidence From Romania and Spain

“…This paper presents a worthy extension over the previous literature since it distinguishes across the main sectors of the Japanese economy (manufacturing, construction and trade) confirming the aggregate results although showing a different time lag for each sector. In an environment closer to the countries to be analysed in this paper, Ziković(2016) recently analysed the macroeconomic elements that can explain firm's bankruptcies in Croatia along the period 2000-2011 throughout a Vector Error Correction Model, concluding that interest rates, as well as industrial production, have a short-term effect on insolvencies while unemployment has a long-run effect.…”

Macroeconomic and institutional drivers of early failure among self-employed entrepreneurs: an analysis of the euro zone

“…From a macroeconomic perspective, the literature has usually focused on variables such as GDP or the output gap (Benito et al, 2004;Carling et al, 2007;Contreras, 2016;Gaffeo & Santoro, 2009;Hol, 2007;Ptak-Chmielewska & Matuszyk, 2019), the level of unemployment (Acosta et al, 2019;Contreras, 2016;Everett & Watson, 1998, Buehler et al, 2012Ptak-Chmielewska & Matuszyk, 2019;Tomas, 2016) , the level of inflation (Acosta et al, 2019;Contreras, 2016;Liu, 2009), tax pressure (Buehler et al, 2012), interest rates (Everett & Watson, 1998, Tomas, 2016 or, the availability of credit (Altman, 1983;Liu, 2004, Tomas, 2016.…”