Company Liquidations, Interest Rates and Debt

Garry Young

The Manchester School of Economic & Social Studies, 1995, vol. 63, issue 0, 57-69

Abstract: This paper examines the relationship between interest rates and company failure. It argues that the response of insolvencies to changes in interest rates depends on the composition of company debt and whether the change in interest rates is expected or unexpected, real or nominal. It shows that when company debt is at variable interest rates, companies are especially vulnerable to unanticipated changes in real interest rates. Evidence is presented which shows that such changes are a major factor in explaining the aggregate company liquidation rate in England and Wales. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:63:y:1995:i:0:p:57-69

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