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Like milk or wine: Does firm performance improve with age?

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  • Coad, Alex
  • Segarra, Agustí
  • Teruel, Mercedes

Abstract

Little is known about how firm performance changes with age, presumably because of the paucity of data on firm age. We analyze the performance of a panel of Spanish manufacturing firms between 1998 and 2006, relating it to firm age. We find evidence that firms improve with age, because ageing firms are observed to have steadily increasing levels of productivity, higher profits, larger size, lower debt ratios, and higher equity ratios. Furthermore, older firms are better able to convert sales growth into subsequent growth of profits and productivity. On the other hand, we also found evidence that firm performance deteriorates with age. Older firms have lower expected growth rates of sales, profits and productivity, they have lower profitability levels (when other variables such as size are controlled for), and also that they appear to be less capable to convert employment growth into growth of sales, profits and productivity.

Suggested Citation

  • Coad, Alex & Segarra, Agustí & Teruel, Mercedes, 2013. "Like milk or wine: Does firm performance improve with age?," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 173-189.
  • Handle: RePEc:eee:streco:v:24:y:2013:i:c:p:173-189
    DOI: 10.1016/j.strueco.2012.07.002
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    More about this item

    Keywords

    Firm age; Firm growth; LAD; Financial structure; Vector auto regression;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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