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

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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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Publisher 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

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

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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 - - - Corporation and Securities Law
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maria Brouwer, 2006. "Reorganization in US and European Bankruptcy law," European Journal of Law and Economics, Springer, vol. 22(1), pages 5-20, July. [Downloadable!] (restricted)
  2. Stefan Buehler & Christian Kaiser & Franz Jaeger, 2004. "Competition Policy and Exit Rates: Evidence from Switzerland," Working Papers 0405, University of Zurich, Socioeconomic Institute, revised Apr 2005. [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!]
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