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The shadow of death: an empirical analysis of the pre-exit performance of young German firms

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  • Almus, Matthias
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    Abstract

    This paper makes an empirical contribution to confirm the stylized fact that the performance of firms deteoriates in the years before exit. For this reason we evaluate whether market exits differ significantly in their employment development in the years before market drop-out compared to surviving firms that have been selected using a non-parametric matching approach. The matching approach allows to find a surviving firm for every market exit that does not differ in important characteristics measured at start-up. The comparison of the employment growth rates among the thus formed groups reveals that the matched surviving firms experience higher growth rates compared to their exiting counterparts up to three years before market exit. Moreover, we find support for the phenomenon called \shadow of death" sneaking around the corner. A considerable number of firms exiting from 1995 until 1998 has experienced continuing employment losses or at least an employment stagnation over several years before market exit. --

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    Bibliographic Info

    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 00-44.

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    Date of creation: 2000
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    Handle: RePEc:zbw:zewdip:5328

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    Related research

    Keywords: New Firms; Employment Growth; Evaluation; Non-Parametric Matching;

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    References

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    1. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier.
    2. Rajan, Raghuram G & Zingales, Luigi, 1998. "Power in a Theory of the Firm," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1777, C.E.P.R. Discussion Papers.
    3. Almus, Matthias & Engel, Dirk & Prantl, Susanne, 2000. "The Mannheim Foundation Panels of the Centre for European Economic Research (ZEW)," ZEW Dokumentationen 00-02, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(1), pages 53-82, January.
    5. Susanne Prantl, 2000. "Post-Entry Selection Among Newly Founded Firms in East and West Germany after Unification: A Competing Risk Model with Forced Bankruptcy Liquidations and Voluntary Liquidations," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 1602, Econometric Society.
    6. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 421-440, December.
    7. Lechner, Michael & Pfeiffer, Friedhelm & Spengler, Hannes & Almus, Matthias, 2000. "The impact of non-profit temping agencies on individual labour market success in the West German state of Rhineland-Palatinate," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 00-02, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
    9. Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
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    Cited by:
    1. Flora Bellone & Patrick Musso & Michel Quéré & Lionel Nesta, 2006. "Productivity and Market Selection of French Manufacturing Firms in the Nineties," Revue de l'OFCE, Presses de Sciences-Po, Presses de Sciences-Po, vol. 97(5), pages 319-349.
    2. repec:spo:wpecon:info:hdl:2441/7185 is not listed on IDEAS
    3. Köke, Jens, 2001. "Determinants of acquisition and failure: stylized facts and lessons for empirical studies," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 01-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Koke, Jens, 2002. "Determinants of acquisition and failure: evidence from corporate Germany," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 13(4), pages 457-484, December.

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