A time series analysis of private college closures and mergers

This study examines and explains private four-year college closures and mer gers in the United States using time series data at the national level for the period 1960 to 1994. The data imply that, except during the 1970s, priv ate colleges were much less likely to close than businesses in general. Fur thermore, the data indicate that private college mergers occur more often t han casual empiricism suggests. Multiple regression analysis of the exit an d merger decision reveals that private college closures and mergers are mor e likely when the real tuition rate declines and real faculty salaries rise at private colleges. Both the closure and merger rates are found to be hig hly responsive with respect to changes in private tuition and faculty salar ies. The empirical results further indicate that religiously-affiliated col leges are less likely to close and merge than secular institutions and that a larger student pool leads to less closing and merging of private four-ye ar colleges.