Business bankruptcies reported by Experian Business Information Services for the second quarter of 2011 show some interesting results. The most interesting being that the largest companies had the biggest failure rate.
While the publicly released data doesn't give the actual number of bankruptcies, they are represented by categories of colors from tan (least bad) to dark red (worst). I'll represent them with numbers from least bad (1) to worst (5). For the period ending June 2011, the breakdown in bankruptcies by business size, in terms of number of employees, is as follows:
Company Size Bankruptcies
1 - 4 4
5 - 9 4
10 - 19 4
20 - 49 3
50 - 99 3
100 - 249 4
250 - 499 4
500 - 999 4
It's not surprising that the smallest companies had a high bankruptcy rate. But it does seem surprising to me that the largest companies had the highest rate. Anyone have an explanation for this?
I think it shows that the medium sized companies are not doing as well as the huge companies. That Microsoft and Google and Apple's of the world have cash reserves larger some some countries is well documented. Those are gigantic companies. But what about the medium sized companies with 1,000 - 5,000 employees? I think this is where the problem is occurring. These companies don't have cash reserves in the billions and also don't have good access to credit. Thanks to TARP and a general overreaction in the financial sector to poor decisions made in the past, banks just aren't lending much money these days. Those that want to lend are either restrained because their ratios are out of whack or have so tightened up their underwriting standards that it's difficult for all but the best companies to qualify.
Here in Alabama, we're right in the middle of the pack as far as averages are concerned. What is it that makes a state like Florida good and Texas bad? That's a question for another day.