Macroeconomic instability and business exit

A. Bhattacharjee, C. Higson, S. Holly, P. Kattuman

    Research output: Contribution to journalArticlepeer-review

    75 Citations (Scopus)


    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. © 2009 The London School of Economics and Political Science.
    Original languageEnglish
    Pages (from-to)108-131
    Number of pages24
    Issue number301
    Publication statusPublished - Feb 2009


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