Measuring corporate health through companies that form, fail and last

We’ve used 3 different measures to understand the effect of the 2008 Global Financial Crisis (GFC) on the corporate health of New Zealand companies.

Measuring Corporate health full screen detailed

We’ve gathered figures from the 2001 to 2017 financial years about the number of companies that have been set up, the number that have failed and the average time companies last in New Zealand. The results indicate that the GFC affected our economic climate and subsequently our corporate health, and that it’s taken us more than 5 years to recover.

Companies that were incorporated (2001 to 2017)

The number of companies being incorporated hit an all-time high in 2007 of 74,239 — more than twice the number that were formed in 2001. In 2009 there was a marked decline with only 48,078 companies being incorporated that year. By 2017 we hadn’t returned to the 2007 levels, but since 2012 there had been a steady increase. In 2017 59,117 new companies were formed.

Companies that went into liquidation (2001 to 2017)

We’ve analysed liquidations over the 16 years from 2 perspectives:

  • the proportion of liquidations in a year compared with the number of companies that were incorporated, and
  • the percentage of liquidations compared with the total number of companies on the register.

Both measures show a similar trend, despite, according to our Companies Office figures, the number of companies being incorporated growing by 109 per cent from 35,552 in 2001 to 74,239 in 2007.

In 2001 company liquidations amounted to nearly 5 per cent of the companies that were incorporated that year. By 2007 this had decreased to 3.6 per cent indicating healthier prospects for companies around that time. This trend turned during the GFC rising to 8.1 per cent in 2009. Since then the proportion of company liquidations to new companies has dropped each year. In 2017 they were 3.3 per cent.

Graph showing proportion of liquidations to registered companies

In 2001 the percentage of liquidations compared with the number of companies on the register was 0.7 per cent dropping to 0.5 per cent in 2008. As the effects of the GFC flowed through in 2009, there was an increase to 0.7 per cent. Since then there has been a steady decline to 0.3 per cent in 2017.

Both of these indicators show that corporate health has improved since the GFC.

How long NZ companies last

Anecdotally, the average age of a company has, for some time, been 7 years. Analysis of our data shows that the average age of a company in 2007 was 8.5 years. By 2017 this had risen to 9.9 years.