Purpose - The purpose of this paper is to theoretically examine under what circumstances economic cycles advance or deter corporate defaults. Design/methodology/approach - The theoretical inferences are authenticated through Monte Carlo simulations. Findings -It is found that an ongoing...

This study theoretically examines under what circumstances economic cycles advance or deter corporate defaults. We find that an ongoing catastrophe dominates other macroeconomic conditions and forces corporate failures. In contrast, when a catastrophe is unlikely, a constant economy permits...