The geographic determinants of bankruptcy: evidence from Switzerland
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This paper examines the geographic determinants of firm bankruptcy. We employ hazard rate models to study the bankruptcy risk of a firm, allowing for time-varying covariates. Based on a large sample from all geographic areas and the major sectors of the Swiss economy, we find the following main results: (1) Bankruptcy rates tend to be lower in the central municipalities of agglomerations; (2) bankruptcy rates are lower in regions with favorable business conditions (where corporate taxes and unemployment are low and public investment is high); (3) private taxes and public spending at the local level have little impact on bankruptcy rates.
KeywordsBankruptcy Geography Agglomeration Religion Language Exit
JEL ClassificationsC41 R10 Z10
We are grateful to the associate editor, Philipp Koellinger, and three anonymous referees for many detailed comments. We also thank Dirk Burghardt, Manfred Fischer, Bruno Frey, Dennis Gärtner, Luigi Guiso, Daniel Halbheer, Ulrich Kaiser, Mariko Klasing, Rico Maggi, Gianmarco Ottaviano, Dieter Pennerstorfer, Armin Schmutzler, Enrique Schroth, Christoph Weiss, and seminar participants at Arlington (IIOC 2008), Berne (Swiss IO Day 2006), Brussels (EcoMod), Lugano, Milan (EEA 2008), Munich (VfS 2007), Valencia (EARIE 2007), and Zurich for helpful discussions and suggestions. Support from the Swiss National Science Foundation (through grant no. PP0012-114754), the Swiss Federal Statistical Office, and the Cantonal Bank of St. Gallen is gratefully acknowledged. The usual disclaimer applies. In particular, the opinions expressed in this paper are those of the authors and are not attributable to HSBC. The authors are solely responsible for the contents.
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