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

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