Article: Intervention impact of Tax Reform Act on the business failure process.

ABSTRACT

This paper investigates the impact of the intervention of Tax Reform Act on the business failure momentum. The data covers the period January 1967 through December 1986 and divided into pre-and post-event periods for both large and small business failures. We employ intervention analysis with transfer function modeling for the full data set and maximum likelihood time-series regression on the pre- and post-event periods. After controlling for the new business formations, we find the Tax Reform Act is instrumental in extending the memory of business failure momentum and amplifying the domino effect. These results also echoed in the intervention analysis. ...

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