Paul Kattuman (University of Cambridge), Chris Higson, S.Holly, Arnab Bhattacharjee

Business Failure in UK and US Quoted Firms: Impact of Macro-Economic Instability and the Role of Legal Systems

Firms exit through the mutually precluding events of bankruptcy and acquisition. We use a competing-risks hazard model to identify the characteristics leading to each of these two outcomes using over thirty years of data on US and UK quoted firms. While many of the predictions of theory are borne out by the data, there are significant differences in the way in which firms in the US and the UK react to changes in the macroeconomic environment and, particularly to macroeconomic instability. We argue that these differences in response my be attributable to differences in the US and the UK in the bankruptcy codes.

Keywords: Bankruptcy, Acquisitions, Macro-economic Instability, Competing Risks Cox Proportional Hazards Model, Chapter 11, Receivership

JEL Codes: L16, G33, E32, K22, C41

Session: 5e   Room 2004   Category: Business demographics and performance 2

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