Macroeconomic determinants of corporate failures in Poland

Jędrzej Siciński Jędrzej Siciński

doi:10.26881/wg.2019.2.02

Abstract

This study aims at identifying macroeconomic factors of corporate bankruptcy.The main objective of this work is to analyse quantity of bankruptcy in Poland in 2000-2017 and attempt to estimate parameters of the regression model where the number of insolvent companies is explained by variance of macroeconomic factors. Essential data has been collected from GUS and Coface resources. Based on selected, macroecomic variables, econometric cause-effect model has been developed. The equation has been estimated by the Ordinary Least Squares method (OLS). A statistical investigation resulted in observing few macroeconomic factors with influence on corporate failure intensity in Poland, among others: expenditures on consumer goods and services, export and exchange rates.

Highlights

An unpredictable environment causes organizational instability which is a demanding issue for contemporary economic systems
Corporate failures pose anintegral part of daily businessand should be considered as a natural piece of an organizational life cycle (OLC)*
One of them is to have the assets the value of which is sufficient to cover any future legal fees. Both economist and corporate lawyers agree that insolvency is a legal term, linked with an official, legal state which is useful for enterprise and its creditors to solve the debt problem fairly

Summary

Introduction

An unpredictable environment causes organizational instability which is a demanding issue for contemporary economic systems. Permanent instability creates uncertainty and market volatility. One of the main consequence of business volatility is bankruptcy. Corporate failures pose anintegral part of daily businessand should be considered as a natural piece of an organizational life cycle (OLC)*. It’s because of the main obstacle to predicting bankruptcy, which is a wide selection of variables related to a company’s financial position. Plenty of these variables are widely known, say macroeconomic indicators such as GDP growth, exchange and interest rates. Corporate failures exert some critical influence on both enterprise owners and the whole economy, strong. Awareness of potential links between macro economy and bankruptcies is in the interest of policy makers

Theory of corporate insolvency and bankruptcy

Macroeconomic factors of bankruptcies - review of previous studies

Findings

Conclusion