Macroeconomic Conditions And Business Exit: Determinants Of Failures And Acquisitions Of UK Firms

The authors study the impact of macroeconomic instability on business exit in a world where acquisition and bankruptcy are co-determined. The objective is to discover how the processes that determine bankruptcies and acquisitions depend on the macroeconomic environment, particularly, macroeconomic instability. To this end they estimate competing risks hazard regression models using data on UK quoted firms spanning a thirty-eight year period that witnessed several business cycles. They find that macroeconomic instability has opposite effects on bankruptcy hazard and acquisition hazard, raising the former and lowering the latter.