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


Type

Working Paper

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Authors

Bhattacharjee, Arnab 
Higson, Chris 
Holly, Sean 
Kattuman, Paul 

Abstract

Using data over a 34-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 timing of these alternative outcomes and we exploit this to focus attention on how the hazards change over the business cycles, conditional on the post-listing age of the firm. We find that the volatility in macro environment has a role in determining, in different ways, the hazard of firms going bankrupt or being acquired.

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Keywords

Acquisitions, Macroeconomic Instability, Competing risks, Cox proportional hazards model

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Publisher

Faculty of Economics

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