The impact of economic freedom on corporate insolvencies in the European countries

Abstract

Governments constantly try to improve the macroeconomic environment for the business so that the country should attract good investment and it should grow economically. It means the policies of the government directly effects the businesses. Government policies may be designed to provide the economic freedom or it may be strict to bind the firms into different rules and regulations. However, studies have empirically confirmed that economic freedom positively leads towards firm’s growth, and ultimately, to firm’s stability. Moreover, studies have also found the negative correlation between economic freedom and business activity. Still, insignificant attention has been given to the correlation between economic freedom and the actual insolvency. Thus, this study will try to bridge this gap in two ways. Firstly, it will help theoretically by providing the insights into the relation between economic freedom and firms’ insolvency in different economies of Europe including developing and developed economies. Secondly, it will help practically the economic policy makers to determine the influence of economic freedom on number of firms’ insolvency.