Macroeconomic instability and business exit: determinants of failures and acquisitions of UK firms

Higson, C, Bhattacharjee, A, Holly, S and Kattuman, P (2008) Macroeconomic instability and business exit: determinants of failures and acquisitions of UK firms. Economica, 76 (301). pp. 108-131. ISSN 1468-0335

Abstract

We study the impact of the macroeconomic environment on business exit in a world where acquisition and bankruptcy are co-determined. We estimate competing risk hazard regression models using data on UK quoted firms spanning a 38-year period that witnessed several business cycles. We find that the processes determining bankruptcies and acquisitions depend on the macroeconomic environment. In particular, macroeconomic instability has opposing effects on bankruptcy hazard and acquisition hazard, raising the former and lowering the latter. While bankruptcy hazard is counter-cyclical and acquisition hazard pro-cyclical, the US business cycle is a better predictor than the UK cycle itself.

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Item Type: Article
Subject Areas: Accounting
Additional Information: © 2008 John Wiley & Sons
Subjects: M > Macroeconomics
Date Deposited: 21 Dec 2016 14:40
Last Modified: 18 Jul 2018 16:04
URI: http://lbsresearch.london.edu/id/eprint/772
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