New Zealand business failure and its macroeconomic variables.

• Main Author: Pang, Penney
• Language: en
• Published: University of Canterbury. Accounting and Information Systems 2009
• Online Access: http://hdl.handle.net/10092/2705

Although business failure is essentially a microeconomic phenomenon which reflects a particular firm's situation, the likelihood of business failure can also be influenced by the economic conditions of the nation in which the business operates. Within the New Zealand context, previous macroeconomic studies of business failure focused on registered companies, and overlooked the importance of unincorporated entities. Therefore, the objective of this thesis is to re-examine the relationship between business failure, including both incorporated and unincorporated entities, and the aggregate economy. Accordingly, two research questions are developed: what are the incorporated and unincorporated business failure rates, and what macroeconomic variables explain the changes in the level of business failure. This study estimates the failure of unincorporated businesses by using bankruptcy statistics of "employers of labour" and "working on own account but not employing labour." This study concentrates on three kinds of business failure during the period of 1947 to 1998, courtordered company liquidations, company receiverships, and unincorporated bankruptcies; correspondingly, three lagged multiple regression models are developed. This study found that there is a relationship between business failure and the nation's economic conditions, especially the country's monetary conditions, economic activity, and new business formation. It was also found that economic activity has the greatest and most immediate impact on the level of business failure.