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Determinants of Firms’ Liquidation and Acquisition in the Indian Electronics Industry

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  • Mohd Irfan

Abstract

This study examines the determinants of firms’ liquidation and acquisition in the Indian electronics industry during the period 1990–2006. It is argued that liquidation and acquisition are alternative modes of exit. Therefore, these modes of exit might have different determinants. To explore this possibility, a multinomial logistic (MNL) regression model is estimated using cross-sectional data of 540 firms. We find that the effects of age, size, leverage, innovative competence and profitability are significant for the likelihood of liquidation. In contrast, the effect of profitability was found insignificant for the likelihood of acquisition. Moreover, the effects of size and leverage are dissimilar across the exit modes, that is, large firms are more likely to be liquidated but less likely to be acquired, and high leverage firms are more likely to be liquidated but less likely to be acquired. The findings of this study show that the determinants of liquidation and acquisition modes of exit are different in the Indian electronics industry. JEL Classification : C25, G33, G34, L63

Suggested Citation

  • Mohd Irfan, 2012. "Determinants of Firms’ Liquidation and Acquisition in the Indian Electronics Industry," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 6(1), pages 75-90, February.
    • Handle: RePEc:sae:mareco:v:6:y:2012:i:1:p:75-90
    DOI: 10.1177/097380101100600104
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    More about this item

    Keywords

    Liquidation; Acquisition; Indian Electronics Industry; Multinomial Logistic Regression Model;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment

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