Firm Survival, Uncertainty, and Financial Frictions: Is There a Financial Uncertainty Accelerator?

16 Pages Posted: 27 Nov 2015

See all articles by Joseph Byrne

Joseph Byrne

Heriot-Watt University - Department of Accountancy, Economics and Finance

Marina‐Eliza Spaliara

University of Glasgow - Adam Smith Business School

Serafeim Tsoukas

University of Glasgow - Adam Smith Business School

Date Written: January 2016

Abstract

Using a large panel of unquoted UK firms over the period 2000–2009, we examine the impact of firm‐specific uncertainty on corporate failures. In this context we also distinguish between firms which are likely to be more or less dependent on bank finance as well as public and nonpublic companies. Our results document a significant effect of uncertainty on firm survival. This link is found to be more potent during the recent financial crisis compared with tranquil periods. We also uncover significant firm‐level heterogeneity because the survival chances of bank‐dependent and nonpublic firms are most affected by changes in uncertainty, especially during the recent global financial crisis.

JEL Classification: E44, F32, F34, G32

Suggested Citation

Byrne, Joseph and Spaliara, Marina-Eliza and Tsoukas, Serafeim, Firm Survival, Uncertainty, and Financial Frictions: Is There a Financial Uncertainty Accelerator? (January 2016). Economic Inquiry, Vol. 54, Issue 1, pp. 375-390, 2016, Available at SSRN: https://ssrn.com/abstract=2695908 or http://dx.doi.org/10.1111/ecin.12240

Joseph Byrne (Contact Author)

Heriot-Watt University - Department of Accountancy, Economics and Finance ( email )

Scotland
United Kingdom

Marina-Eliza Spaliara

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

Serafeim Tsoukas

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

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