To what extent does the interest burden affect firm survival? Evidence from a panel of UK firms during the recent financial crisis

Guariglia, A., Spaliara, M. E. and 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), pp. 576-594. (doi:10.1111/obes.12120)

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Abstract

Using a panel of mainly unquoted UK firms over the period 2000–09, we document a significant effect of changes in the interest burden from debt-servicing on firm survival. The effect is found to be stronger during the recent financial crisis compared with more tranquil periods. Furthermore, the survival chances of bank-dependent, younger, and non-exporting firms are most affected by changes in the interest burden, especially during the crisis. Our results are robust to using different estimation methods and different interest burden measures They suggest that one way for policymakers to mitigate the effects of financial crises by limiting firm failures would be to prevent financing costs from rising, especially for those firms more likely to face liquidity constraints.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Spaliara, Dr Marina Eliza and Guariglia, Professor Alessandra and Tsoukas, Professor Serafeim
Authors: Guariglia, A., Spaliara, M. E., and Tsoukas, S.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Oxford Bulletin of Economics and Statistics
Publisher:John Wiley & Sons Ltd.
ISSN:0305-9049
ISSN (Online):1468-0084
Published Online:18 November 2015
Copyright Holders:The Department of Economics, University of Oxford and John Wiley and Sons Ltd
First Published:First published in Oxford Bulletin of Economics and Statistics 78(4):567-594
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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