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Macro Economic Instability and Business Exit: Determinants of Failures and Acquisitions of Large UK Firms

Arnab Bhattacharjee (), C. Higson, Sean Holly () and P. Kattuman

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Using data over a 34-year span on UK quoted firms, this paper seeks to identify the factors that increase the likelihood of exit of firms. Firms may disappear through the mutually precluding events of bankruptcies and acquisitions. We use a competing-risks hazard model to determine characteristics leading to each outcome. Hazard models make use of the data on timing of these alternative outcomes and we exploit this to focus attention on how the hazards change over the business cycles, conditional on the post-listing age of the firm. We find that the volatility in macro environment has a role in determining, in different ways, the hazard of firms going bankrupt or being acquired.

Keywords: bankruptcy; acquisitions; macro-economic instability; competing risks; Cox proportional hazards model (search for similar items in EconPapers)
JEL-codes: C41 D21 E32 L16 (search for similar items in EconPapers)
Pages: 34
Date: 2002-03
New Economics Papers: this item is included in nep-ent
Note: IO
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