Author: | Simmons, P. |
Title: | Bad luck and fixed costs in personal bankruptcies. |
Journal: | Economic Journal
1989 : MAR, VOL. 99:394, p. 92-107 |
Index terms: | BANKRUPTCY FIXED COSTS ECONOMETRIC MODELS |
Language: | eng |
Abstract: | There are many possible reasons for the failure of firms: deliberate fraudulent activity; inefficiency and bad calculation of economic decisions; bad luck. In the event of low variable profits for whatever reason the combination of fixed costs and liquidity constraints can force the firm into bankruptcy. The purpose of this investigation is to explore how these factors determine the failure rate amongst small unincorporated businesses that have survived for a minimum period of around two years. Bankruptcy under perfect competition is examined. Bankruptcies among self-employed over 1954-1983 are characterized using statistical methods. The effects of industry, interest rates, market structure are analyzed. |
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