Heavy Lifting - thoughts and web finds by an economist
     I also contribute to Division of Labour Load HL's Front Page
Tuesday, November 20, 2007

Business Bankruptcy Filings

While surfing around I came across the American Bankruptcy Institute, which reports quarterly data on various types of bankruptcy filings. I grabbed the data on business filings for giggles.

Here's a time-plot:



The big spike at the end of 2005 represents a surge before the law was changed in 2006 making it harder to file bankruptcy and receive protection from creditors. Here's a somewhat naive regression model relating filings to the previosu quarter's filings, the previous quarter's real gdp growth, the quarter's unemployment, a time trend, and a dummy variable that takes a value of one for the period after the new bankruptcy laws went into effect. I also included two leads of the dummy variable in order to see if people changed behavior in the lead-up to the law changing:


. reg filings l.filings l.rgrowth l.aveunemp f(0/2).newlaw time

Source | SS df MS Number of obs = 52
-------------+------------------------------ F( 7, 44) = 39.03
Model | 276354904 7 39479271.9 Prob > F = 0.0000
Residual | 44508775.6 44 1011563.08 R-squared = 0.8613
-------------+------------------------------ Adj R-squared = 0.8392
Total | 320863679 51 6291444.69 Root MSE = 1005.8

------------------------------------------------------------------------------
filings | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
filings |
L1. | .2054086 .1085224 1.89 0.065 -.013304 .4241211
rgrowth |
L1. | -10790.03 30534.89 -0.35 0.726 -72329.05 50748.99
aveunemp |
L1. | 416.0197 220.8819 1.88 0.066 -29.13839 861.1779
newlaw |
--. | -6421.982 1139.494 -5.64 0.000 -8718.481 -4125.484
F1. | 3240.663 1430.592 2.27 0.028 357.4943 6123.832
F2. | 1551.96 1055.806 1.47 0.149 -575.8777 3679.797
time | -401.4763 74.80301 -5.37 0.000 -552.2319 -250.7208
_cons | 8512.822 1607.366 5.30 0.000 5273.387 11752.26

The previous quarter's filings are positively related to the current quarter's filings. Lagged growth is not related to filings, but lagged unemployment is. If the lagged unemployment is a measure of macroeconomic health (or lack thereof), then the positive parameter estimate makes sense.

The years after the new bankruptcy laws were in force, business bankruptcies fell dramatically. However, the two quarters before the changes went into effect experienced a dramatic increase in the number of filings. People may have realized that their abllity to file for bankruptcy was going to change and took advantage of a window of opportunity?

Stata Data File

Comments:
Nice Post
-------------
article rewrite
 
Post a Comment



Purchase




Le Chai - galerie du vin



Support



Popularity

Posts that contain Craig Depken per day for the last 90 days.



Contacts

Heavy Lifting's Main Page
Email Me
Atom Feed

WWW
Heavy Lifting




Great Links

Money I Found Today

Heavy Lifting - Firehose style (56k warning)



Recent Posts

- Business Bankruptcy Filings




Archives


home


Visitors
Site Meter Blogroll Me!



Credits

Modified maystar design
powered by blogger