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

35 Pages Posted: 23 May 2002

See all articles by Arnab Bhattacharjee

Arnab Bhattacharjee

University of St. Andrews - School of Management

Chris Higson

London Business School

Sean Holly

University of Cambridge - Department of Applied Economics

Paul Kattuman

University of Cambridge - Judge Business School

Date Written: March 5, 2002

Abstract

Using data over a thirty-four 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 the timing of these alternative outcomes and we exploit this to focus attention on how the hazards change over the business cycle, conditional on the post-living age of the firm. We find that the volatility in the macro environment has a role in determining, in different ways, the hazard of firms going bankrupt or being acquired.

Keywords: Bankruptcy, Acquisitions, Macro-economic Instability, Competing Risks, Cox Proportional Hazards Model

JEL Classification: D32, D21, C41, L16

Suggested Citation

Bhattacharjee, Arnab and Higson, Chris and Holly, Sean and Kattuman, Paul A., Macro Economic Instability and Business Exit: Determinants of Failures and Acquisitions of Large UK Firms (March 5, 2002). LBS Working Paper No. 02-034. Available at SSRN: https://ssrn.com/abstract=311240 or http://dx.doi.org/10.2139/ssrn.311240

Arnab Bhattacharjee

University of St. Andrews - School of Management ( email )

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HOME PAGE: http://www.st-andrews.ac.uk/economics/staff/pages/a.bhattacharjee.shtml

Chris Higson

London Business School ( email )

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London, NW1 4SA
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+44 171 724-7875 (Fax)

Sean Holly

University of Cambridge - Department of Applied Economics ( email )

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Cambridge, CB3 9DE
United Kingdom
+44-1223-335251 (Phone)

Paul A. Kattuman (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Road
Cambridge CB2 1AG
United Kingdom
+44 1223 764 136 (Phone)

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