Does spatial location affect business liquidations

Current studies in aggregate business liquidations has paid little attention to the potential importance of firms' geographical (spatial) location. However, there is evidence of spatial agglomeration of economic activity which poses the question of potential implication in business liquidations. This study investigates the potential existence of spatial effects between businesses that enter liquidation in a sample of European countries. Statistically significant spatial effects were detected in the form of SEM and SDM spatial models. Such effects indicate that models that do not account for spatial effects are potentially biased. These results confirm the existence of spatial effects in business liquidations, implying that the spatial location should be considered for modelling and policy making purposes. As such, further research maybe needed in this area so as to further explore the impact of the spatial aspect.