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

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

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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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
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  27. Clarke, Roger & Ioannidis, Christos, 1996. "On the relationship between aggregate merger activity and the stock market: some further empirical evidence," Economics Letters, Elsevier, vol. 53(3), pages 349-356, December.
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  29. Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-50, August.
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