An integrative and dynamic analysis of business bankruptcy in Australia

This thesis proposes an integrative and dynamic approach for assessing the effects of linkages across industries, industry-specific conditions, aggregate domestic economic conditions and intemational economic conditions on the rates of bankruptcy in six of Australia's major industries: primary production, mining and quarrying, manufacturing, building and constmction, transport, storage and communication and finance and property. The effects of these factors are estimated within a dynamic and simultaneous-equation system with pooled cross-state time-series observations for the period 1978 to 1992. In addition, preliminary tests of cointegration and causality are conducted vyith nation-wide time-series data for the period 1973 to 1992 in order to explore the possible linkages among industries' bankruptcy rates.The estimation results of the preliminary analyses and the dynamic and simultaneous equation system have both suggested inter-industry linkages among bankruptcy rates. Moreover, the estimation results of the simultaneous-equation systera have lent support to the survival of the fittest hypothesis for all industries studied. A number of other economic variables have also been found to be significantly associated with business bankruptcy rates, which include industryspecific variables such as the number of industrial disputes, housing prices and raanufacturing wage rate; domestic economic variables such as state per-capita income, federal government spending, personal income tax rate, interest rate and money supply; as well as intemational economic factors such as exchange rate, world prices and Japan's GDP. Among these variables, government policy instruments have been foimd to have relatively larger effects on the rates of bankruptcy. The estimation results of these analyses might help policy-makers design a comprehensive stabilisation policy for the Ausfralian business sector.