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The effect of crises on firm exit and the moderating effect of firm size

Author

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  • Amorim Varum, Celeste
  • Rocha, Vera Catarina

Abstract

The liability of smallness assumption suggests that smaller firms face higher exit risks. However, does it apply during crises? We show that during downturns size reduces firms’ exit risk by less; the hazard rate increases more rapidly in size.

Suggested Citation

  • Amorim Varum, Celeste & Rocha, Vera Catarina, 2012. "The effect of crises on firm exit and the moderating effect of firm size," Economics Letters, Elsevier, vol. 114(1), pages 94-97.
  • Handle: RePEc:eee:ecolet:v:114:y:2012:i:1:p:94-97
    DOI: 10.1016/j.econlet.2011.09.015
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    References listed on IDEAS

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    1. Mark Gertler & Simon Gilchrist, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 309-340.
    2. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
    3. Liu, Jin-Tan & Tsou, Meng-Wen & Hammitt, James K., 1999. "Do small plants grow faster? Evidence from the Taiwan electronics industry," Economics Letters, Elsevier, vol. 65(1), pages 121-129, October.
    4. Miguel Manjón-Antolín & Josep-Maria Arauzo-Carod, 2008. "Firm survival: methods and evidence," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(1), pages 1-24, March.
    5. Silviano Pérez & Amparo Llopis & Juan Llopis, 2004. "The Determinants of Survival of Spanish Manufacturing Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(3), pages 251-273, August.
    6. Audretsch, David B., 1995. "Innovation, growth and survival," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 441-457, December.
    7. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, February.
    8. Agarwal, Rajshree, 1996. "Technological activity and survival of firms," Economics Letters, Elsevier, vol. 52(1), pages 101-108, July.
    9. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    10. Boeri, Tito & Bellmann, Lutz, 1995. "Post-entry behaviour and the cycle: Evidence from Germany," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 483-500, December.
    11. Hwee Hoon Tan & Hai Hui See, 2004. "Strategic Reorientation and Responses to the Asian Financial Crisis: The Case of the Manufacturing Industry in Singapore," Asia Pacific Journal of Management, Springer, vol. 21(1_2), pages 189-211, March.
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    Citations

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    Cited by:

    1. Damien Rousselière, 2017. "A flexible approach to age dependence in organizational mortality. Comparing the life duration for cooperative and non-cooperative enterprises using a Bayesian Generalized Additive Discrete Time Survi," Working Papers SMART - LERECO 17-08, INRA UMR SMART-LERECO.
    2. Bartz, Wiebke & Winkler, Adalbert, 2016. "Flexible or fragile? The growth performance of small and young businesses during the global financial crisis — Evidence from Germany," Journal of Business Venturing, Elsevier, vol. 31(2), pages 196-215.
    3. M. Grazzi & C. Piccardo & C. Vergari, 2017. "Building a firm level dataset for the analysis of industrial dynamics and demography," Working Papers wp2003, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. repec:eee:respol:v:47:y:2018:i:7:p:1321-1333 is not listed on IDEAS
    5. Varum, Celeste & Rocha, Vera Catarina & Valente da Silva, Hélder, 2014. "Economic slowdowns, hazard rates and foreign ownership," International Business Review, Elsevier, vol. 23(4), pages 761-773.
    6. repec:spr:lsprsc:v:10:y:2017:i:2:d:10.1007_s12076-017-0185-y is not listed on IDEAS

    More about this item

    Keywords

    Survival; Hazard; Firm size; Crisis; Manufacturing; Portugal;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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