IMPACT OF MACROECONOMIC FACTORS ON BUSINESS FAILURE: AN EMPIRICAL STUDY OF INDIAN COMPANIES

Ashley D’Souza; Chandrashekhar R

doi:10.29121/shodhkosh.v5.i6.2024.2918

Authors

Ashley D’Souza Assistant Professor, Department of MBA, Vivekananda College of Engineering and Technology, Nehru Nagar, Puttur, Karnataka -574203, India
Dr. Chandrashekhar R Assistant Professor, Department of Business Administration, Mangalore University, Mangalagangothri, Karnataka-574199, India

DOI:

https://doi.org/10.29121/shodhkosh.v5.i6.2024.2918

Keywords:

Business Failure, Macroeconomic Variables, Indian Companies, Financial Distress, Bankruptcy, Liquidation, India

Abstract [English]

This study mainly aimed to analyze the impact of macroeconomic variables on business failures. The study considered inflation, GDP, foreign direct investment, government debt, and listed company data as dependent variables, and Return on Equity as an independent variable. For the study, data from 10 Indian listed companies were considered for the period from 2014 to 2020. The study uses a panel data regression method employing fixed-effect and random-effect models. The regression analysis provides a detailed examination of the relationship between Return on Equity (ROE) and several key economic indicators, shedding light on the intricate dynamics that shape profitability within the studied context. These findings suggest that the current model may not adequately capture the full range of determinants affecting profitability, thus showing that macroeconomic variables are notable in predicting business failures. Further research with more macroeconomic variables and modifications of the model is required to improve its prediction accuracy and explanatory depth, resulting in a more robust framework for understanding and analyzing ROE in the context of the study.

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