Abstract
Purpose
This paper examines macroeconomic factors affecting insolvency level in the UK construction industry.
Design/methodology/approach
A lagged dependent variable (LDV) model is proposed which adequately addressed the serial correlation and endogeneity problems commonly existed in time series data. Objective macroeconomic data from Q3 1997 to Q4 2023 are used to evaluate seven refutable hypotheses.
Findings
It is found that higher unemployment rate or annual interest burden leads to higher number of insolvencies, while higher construction output value or interest rate leads to lower insolvencies. Domino effect in construction insolvency is also confirmed.
Research limitations/implications
The proposed solutions to the missing data on 3 quarters and the changes in the industry breakdown methods during the study period might have affected the accuracy and consistency of data.
Practical implications
The paper provides objective insights to factors affecting construction insolvency, offering tools for future policy formulation.
Social implications
Knowing factors affecting insolvencies helps formulating solutions.
Originality/value
Previous studies on insolvency in construction industry have largely focused on prediction of insolvency of individual companies using firm level financial data, which are symptoms of failure rather than root causes. Studies using questionnaires could be subjective and the limited studies using macroeconomic factors often have methodological issues. This paper bridges the gap by analysing objective macroeconomic data with a sound methodology.
More Information
Divisions: | School of Built Environment, Engineering and Computing |
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Identification Number: | https://doi.org/10.1108/ECAM-07-2024-0974 |
Status: | Published |
Refereed: | Yes |
Publisher: | Emerald |
Additional Information: | © Emerald Publishing Limited |
Uncontrolled Keywords: | Insolvency; 330202 Building construction management and project planning; construction; Macroeconomic; LDV model; Time Series data; UK; 0905 Civil Engineering; 1202 Building; 1503 Business and Management; Building & Construction; 3301 Architecture; 3302 Building; 4005 Civil engineering |
SWORD Depositor: | Symplectic |
Depositing User (symplectic) | Deposited by Yung, Ping |
Date Deposited: | 14 Mar 2025 15:06 |
Last Modified: | 31 Mar 2025 07:15 |
Item Type: | Article |
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License: Creative Commons Attribution Non-commercial
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