The competing risks of acquiring and being acquired: Evidence from Colombia’s financial sector Andre ´ s Felipe Garcı ´a-Suaza a , Jose ´ E. Go ´ mez-Gonza ´ lez b, * a Universidad del Rosario, Calle 14 No. 4-69, Bogota ´, Colombia b Department of Markets Operations and Development, Banco de la Repu ´blica, Cr 7 No. 14-78 piso 4, Bogota ´, Colombia 1. Introduction There is a wide economic literature studying mergers and acquisitions (M&A). Theoretical literature on the topic focuses on explaining causes and consequences of these processes. According to neoclassical economic theory, integration events obey profit maximization logic. Two or more firms decide to vertically or horizontally integrate in order to benefit from economies of scale or scope, or from more market power. Integrations may also take place in order to achieve more efficiency in management. More generally, the main reason argued in favor of capital reallocations among firms is the search of its most Economic Systems 34 (2010) 437–449 ARTICLE INFO Article history: Received 12 June 2009 Received in revised form 9 October 2009 Accepted 9 November 2009 JEL classification: G21 G34 C25 Keywords: Survival analysis Competing risk models Colombia ABSTRACT This paper studies the determinants of the probability of participating in a process of merging or acquisition for financial institutions in Colombia. We use survival analysis techniques and competing risks models to estimate the probability of participating in such processes as an acquiring or acquired firm. Using an especially rich database containing financial information of Colombian banks for the period 1990–2007, we find that both macroeconomic and microeconomic variables are important determinants of this probability. However, there are differential effects for the acquiring firm and the acquired firm. Particularly, while firm size and solvency are significant determinants of the probability of being an acquiring firm, efficiency is an important determinant of the probability of being acquired. Also, the concentration index, which plays no role for acquiring firms, plays an important role in the probability of being acquired. ß 2010 Elsevier B.V. All rights reserved. * Corresponding author. Tel.: +57 1 3431161. E-mail address: jgomezgo@banrep.gov.co (J.E. Go ´ mez-Gonza ´ lez). Contents lists available at ScienceDirect Economic Systems journal homepage: www.elsevier.com/locate/ecosys 0939-3625/$ – see front matter ß 2010 Elsevier B.V. All rights reserved. doi:10.1016/j.ecosys.2009.11.004