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

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Author Info
A. Bhattacharjee
Higson, C.
Holly, S.
Kattuman, P.

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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.

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File URL: http://www.econ.cam.ac.uk/dae/repec/cam/pdf/wp0206.pdf
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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0206.

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Length: 34
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:cam:camdae:0206

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Related research
Keywords: bankruptcy; acquisitions; macro-economic instability; competing risks; Cox proportional hazards model;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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  1. Arnab Bhattacharjee, 2007. "A Simple Test for the Absence of Covariate Dependence in Hazard Regression Models," Discussion Paper Series, Department of Economics 0708, Department of Economics, University of St. Andrews. [Downloadable!]
    Other versions:
  2. Bhattacharjee, Arnab & Bhattacharjee, Madhuchhanda, 2007. "Bayesian Analysis of Hazard Regression Models under Order Restrictions on Covariate Effects and Ageing," MPRA Paper 3938, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. Arnab Bhattacharjee & Chris Higson & Sean Holly & Paul Kattuman, 2007. " Macroeconomic Conditions and Business Exit: Determinants of Failures and Acquisitions of UK Firms," CDMA Working Paper Series 0713, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
  4. Arnab Bhattacharjee, 2005. "Models of Firm Dynamics and the Hazard Rate of Exits: Reconciling Theory and Evidence using Hazard Regression Models," Econometrics 0503021, EconWPA. [Downloadable!]
    Other versions:
  5. David Greenaway & Joakim Gullstrand & Richard Kneller, 2009. "Live or Let Die? Alternative Routes to Industry Exit," Open Economies Review, Springer, vol. 20(3), pages 317-337, July. [Downloadable!] (restricted)
    Other versions:
  6. Philip Bunn & Victoria Redwood, . "Company accounts based modelling of business failures and the implications for financial stability," Bank of England working papers 210, Bank of England. [Downloadable!]
  7. Marcus Box, 2008. "The death of firms: exploring the effects of environment and birth cohort on firm survival in Sweden," Small Business Economics, Springer, vol. 31(4), pages 379-393, December. [Downloadable!] (restricted)
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This page was last updated on 2009-11-16.

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