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Business Failure in UK and US Quoted Firms: Impact of Macroeconomic Instability and the Role of Legal Institutions

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  • Bhattacharjee, A.
  • Higson, C.
  • Holly, S.
  • Kattuman, P.

Abstract

Firms 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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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0420.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0420.

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Length: 48
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:cam:camdae:0420

Note: MA
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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: Bankruptcy; Acquisitions; Macroeconomic Instability; Competing Risks Cox Proportional Hazards Model; Receivership;

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References

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Citations

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Cited by:
  1. Alessandra Amendola & Marialuisa Restaino & Luca Sensini, 2013. "Corporate Financial Distress And Bankruptcy: A Comparative Analysis In France, Italy And Spain," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences & Institute for World Economy of the Romanian Academy, vol. 1(2), pages 131-142, November.
  2. repec:diw:diwfin:diwfin01050 is not listed on IDEAS
  3. Maria Brouwer, 2006. "Reorganization in US and European Bankruptcy law," European Journal of Law and Economics, Springer, vol. 22(1), pages 5-20, July.
  4. 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 200713, Centre for Dynamic Macroeconomic Analysis.
  5. Stefan Buehler & Christian Kaiser & Franz Jaeger, 2004. "Competition Policy and Exit Rates: Evidence from Switzerland," SOI - Working Papers 0405, Socioeconomic Institute - University of Zurich, revised Apr 2005.
  6. Harald Strotmann, 2007. "Entrepreneurial Survival," Small Business Economics, Springer, vol. 28(1), pages 87-104, January.
  7. Arnab Bhattacharjee & Jean Bonnet & Nicolas Le Pape & Régis Renault, 2009. "Entrepreneurial motives and performance: Why might better educated entrepreneurs be less successful?," Working Papers halshs-00809745, HAL.
  8. Arnab Bhattacharjee & Chris Higson & Sean Holly, 2014. "Asymmetric Price Adjustment, Sticky Costs and Operating Leverage over the Business Cycle," SEEC Discussion Papers 1402, Spatial Economics and Econometrics Centre, Heriot Watt University.

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