Macroeconomic determinants of corporate failures. Evidence from Romania and Spain

    Ion Anghel Affiliation
    ; Calcedonia Enache   Affiliation
    ; Fernando Merino   Affiliation


The purpose of this study is to investigate the reaction of the insolvency rate to the various shocks in the economies of Romania and Spain through a Structural Vector Autoregressive model. Departing from quarterly data for 2008–2016, it was found that the future values of the insolvency rate are explained by the past values of the interest rate and the retail trade index, more precisely macroeconomic risk factors cost of debt and changing in demand are main responsible for the health of non-financial corporations sector. In contrast, the influence of the investment rate on insolvency rate is not predictable. In addition, both in Romania and in Spain the interest rate is the main determinant of the insolvency rate variation, beyond its own innovations, in horizons of over 2 quarters. These results were obtained under the circumstances that the analysed period was characterized by the Great Recession and its recovery. In this situation, firms faced a lesser demand as well as a tightening on the possibilities of obtaining the external funds they needed, not only to finance their expansion projects but even their daily operations. Consequently, many firms faced a negative environment that forced them to go out of the market.

Keyword : companies’ failure, macroeconomic factors, cointegration analysis, VAR model, Spain, Romania

How to Cite
Anghel, I. ., Enache, C. ., & Merino, F. . (2020). Macroeconomic determinants of corporate failures. Evidence from Romania and Spain. Journal of Business Economics and Management, 21(3), 743-759.
Published in Issue
Apr 20, 2020
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Akaike, H. (1974). A new look at the statistical model identification. IEEE Transactions on Automatic Control, 19(6), 716–723.

Akaike, H. (1976). Canonical correlation analysis of time series and the use of an information criterion. In R. K. Mehra & D. G. Lainotis (Eds.), System identification: Advances and case studies (pp. 27–96). Academic Press.

Altman, E. (1983). Why businesses fail. Journal of Business Strategy, 3(4), 15–21.

Altman, E. (1993). Company financial distress and bankruptcy (2nd ed.). Wiley & Sons.

Anghel, I. (2002). Falimentul radiografie si predictie. Economica.

Banco de España (2016). Central de Balances. Resultados anuales de las empresas no financieras, Spain. Ed. Banco de España.

Beca, M., & Nișulescu-Ashrafzadeh, I. (2014). The impact of the economic crisis on the corporate insolvency’s evolution in Romania. Procedia – Social and Behavioral Sciences, 109, 891–895.

Bernanke, B., & Gertler, M. (1990). Financial fragility and economic performance. Quarterly Journal of Economics, 105, 87–114.

Bernanke, B., & Gertler, M. (1995). Inside the black box: The credit channel of monetary policy transmission. Journal of Economics Perspectives, 9(4), 27–48.

Bernanke, B. (1986). Alternative explanations of money-income correlation. Carnegie-Rochester Conference Series on Public Policy, 25, 49–99.

Bhattacharjee, A., Higson C., Holly, S., & Kattuma, P. (2009). Macroeconomic instability and business exit: Determinants of failures and acquisitions of UK firms. Economica, 76(301), 108–131.

Boţel, C. (2002). Cauzele inflaţiei în România, iunie 1997-august 2001. Analiză bazată pe vectorul autoregresiv structural. Caiet de studii nr. 11. Banca Naţională a României.

Campbell, J. A. Lo, & MacKinlay, C. (1997). The econometrics of financial markets. Princeton University Press.

Cavallo, A., & Ribba, A. (2015). Common macroeconomic shocks and business cycle fluctuations in Euro area countries. International Review of Economics & Finance, 38, 377–392.

Cloyne, J., & Hürgen, P. (2016). The macroeconomic effects of monetary policy: A new measure for the United Kingdom. American Economic Journal: Macroeconmics, 8(4), 75–102.

Cuthbertson, K., & Hudson, J. (1996). The determinants of compulsory liquidations in the UK. The Manchester School, 64(3), 298–308.

Dăianu, D., Pîslaru, D., & Voinea, L. (2004). Features of bankruptcy in the Romanian economy: Comparative perspective and analysis. Pre-Accession Impact Studies II, 8. European Institute of Romania, Bucharest.

Davis, E. P. (1987). Rising sectoral debt/income ratios: A cause for concern? BIS Economic Papers, No. 20.

Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427–431.

Došenović Bonča, P., Tajnikar, M., Ponikvar, N., & Mörec, B. (2018). Firm growth types and key macroeconomic aggregates through the economic cycle. Journal of Business Economics and Management, 19(1), 138–153.

Enache, C. (2016). Metode cantitative in studiul fenomenelor economice. ASE, Bucuresti.

Everett, J., & Watson, J. (1998). Small business failure and external risk factors. Small Business Economics, 11(4), 371–90.

Fisher, I. (1933). The debt-deflation theory of great depressions. Econometrica, 1(4), 337–357.

Gonzalez, M., Nafe, J., & Rubio, G. (2018). Macroeconomic determinants of stock market betas. Journal of Empirical Finance, 45, 26–44.

Guariglia, A., Spaliara, M. E., & Tsoukas, S. (2016). To what extent does the interest burden affect firm survival? Evidence from a panel of UK firms during the recent financial crisis. Oxford Bulletin of Economics and Statistics, 78(4), 576–594.

Hamilton, J. D. (1994). Time series analysis. Princeton University Press.

Hannan, E. J., & Quinn, B. G. (1979). The determination of the order of an autoregression. Journal of the Royal Statistical Society, Series B, 41(2), 190–195.

Harada, N., & Kageyama, N. (2011). Bankruptcy dynamics in Japan. Japan and the World Economy, 23(2), 119–128.

Hendry, D. F. (1995). Dynamic econometrics. Oxford University Press.

Hernandez Tinoco, M., Holmes, P., & Wilson, N. (2018). Polytomous response financial distress models: The role of accounting, market and macroeconomic variables. International Review of Financial Analysis, 59, 276–289.

Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration – with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), 169–210.

Jones, S., Johnstone, D., & Wilson, R. (2017). Predicting corporate bankruptcy: An evaluation of alternative statistical frameworks. Journal of Business Finance & Accounting, 44(1–2), 3–34.

Kiyotaki, N., & Moore, J. (1997). Credit cycles. Journal of Political Economy, 105(2), 211–248.

Kuběnka, M., & Myšková, R. (2019). Obvious and hidden features of corporate default in bankruptcy models. Journal of Business Economics and Management, 20(2), 368–383.

Leeper, E. M., Sims, C. A., & Zha, T. (1996). What does monetary policy do? Brookings Papers on Economic Activity, 1996(2), 1–78.

Liu, J. (2004). Macroeconomic determinants of corporate failure: Evidence from the UK. Applied Economics, 36(9), 939–945.

Lutkepohl, H., & Reimers, H. E. (1992). Impulse response analysis of cointegrated systems, Journal of Economics Dunamycs and Control, 16, 53–78.

Lutkepohl, H. (1991). Introduction to multiple time series analysis. Springer-Verlag.

Mach, Ł. (2019). Measuring and assessing the impact of the global economic crisis on European real property market. Journal of Business Economics and Management, 20(6), 1189–1209.

MacKinnon, J. G. (1996). Numerical distribution functions for unit root and cointegration tests. Journal of Applied Econometrics, 11(6), 601–618.<601::AID-JAE417>3.0.CO;2-T

Mamatzakis, E., Matouse, R., & Vu, A. N. (2016). What is the impact of bankrupt and restructured loans on Japanese bank efficiency? Journal of Banking & Finance, 72, S187–S202.

National Bank of Romania. (2016). Survey on the access to finance of the non-financial corporations in Romania and their capacity to withstand adverse financial conditions (Edition June 2016).

Neagu, F., & Mărgărit, A. (2005). Riscurile pentru stabilitatea financiara din Romania generate de sectorul populatie. Caiet de studii nr. 14. Banca Naţională a României.

Onete, B. (2003). Sisteme informatice: elemente fundamentale. ASE, Bucuresti.

Pham Vo Ninh, B., Do Thanh, T., & Vo Hong, D. (2018). Financial distress and bankruptcy prediction: An appropriate model for listed firms in Vietnam. Economic Systems, 42(4), 616–624.

Platt, H., & Platt, M. (1994). Business cycle effects on state corporate failure rates. Journal of Economics and Business, 46(2), 113–127.

Qin, D. (2010). Rise of VAR modelling approach. Journal of Economic Surveys, 25(1), 156–174.

Salman, K., Friedrichs, Y., & Shukur, G. (2011). The determinants of small manufacturing firms: Assessing the macroeconomic factors. International Bussiness Research, 4(3), 22–32.

Schwarz, G. (1978). Estimating the dimension of a model. Annals of Statistics, 6(2), 461–464.

Sims, C. A. (1980). Macroeconomics and reality. Econometrica, 48(1), 1–48.

Sims, C. A. (1986). Are forecasting models usable for policy analysis? Quarterly review (Federal Reserve Bank of Minneapolis), Winter, 2–16.

Smaranda, C. (2014). Scoring functions and bankruptcy prediction models – case study for Romanian companies. Procedia Economics and Finance, 10, 217–226.

Stiglitz, J. (2003). Bankruptcy laws: Basic economic principles. In S. Claessens, S. Djankov, & A. Mody (Eds.), Resolution of financial distress: An international perspective on the design of bankruptcy laws (pp. 1–23). The World Bank.

Tian, S., & Yu, Y. (2017). Financial ratios and bankruptcy predictions: An international evidence. International Review of Economics & Finance, 51(C), 510–526.

Tsay, R. (2001). Analysis of financial time series. John Wiley & Sons.

Vasiliu, C. (2008). Warehousing – activity which contribute to supply chain performance. The Amfiteatru Economic Journal, 10(24), 94–10.

Vlieghe, G. (2001). Indicators of fragility in the UK corporate sector (Bank of England working papers 146).

Wadhwani, S. (1986). Inflation, bankruptcy, default premia and the stock market. The Economic Journal, 96(381), 120–138.

Waggoner, D. F., & Zha, T. (1999). Conditional forecasts in dynamic multivariate models. Review of Economics and Statistics, 81(4), 639–651.

Watson, M. (1994). Vector autoregressions and cointegration. In R. F. Engle & D. McFadden (Eds.), Handbook of Econometrics (Vol. 4). Elsevier Science Ltd.

Young, G. (1995). Company liquidations, interest rates and debt. The Manchester School, 63(1), 57–69.

Zhang, J., Bessler, D. A., & Leatham, D. J. (2013). Aggregate business failures and macroeconomic conditions: A VAR look at the US between 1980 and 2004. Journal of Applied Economics, 16(1), 179–202.

Ziković, I. T. (2016). Modelling the impact of macroeconomic variables on aggregate corporate insolvency: Case of Croatia. Economic Research-Ekonomska Istrazivanja, 29(1), 515–528.