Business Failure in UK and US Quoted Firms: Impact of Macroeconomic Instability and the Role of Legal Institutions
AbstractFirms exit through the mutually precluding events of bankruptcy and acquisition. We use a competing risks hazard regression model to identify the characteristics leading to each of these two outcomes using over thirty years of data on US and UK quoted firms. We find evidence about the way in which macroeconomic factors affect firm survival in these two economies, in addition to firm and industry-specific factors. Further, there are significant differences in the way in which firms in the US and the UK react to changes in the macroeconomic environment and, particularly to macroeconomic instability. We argue that these differences in response may be attributable to differences in bankruptcy codes in the US and the UK.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0420.
Date of creation: Mar 2004
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Bankruptcy; Acquisitions; Macroeconomic Instability; Competing Risks Cox Proportional Hazards Model; Receivership;
Find related papers by JEL classification:
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-04-04 (All new papers)
- NEP-CFN-2004-04-04 (Corporate Finance)
- NEP-ENT-2004-04-04 (Entrepreneurship)
- NEP-LAW-2004-04-04 (Law & Economics)
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