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Labor Contracts, Wages and SME Failure

Author

Listed:
  • Nico Dewaelheyns

    (Department of Financial Management, Faculty of Economics and Business, KU Leuven, 2000 Antwerp, Belgium)

  • Cynthia Van Hulle

    (Department of Accountancy, Finance & Insurance, Faculty of Economics and Business, KU Leuven, 3000 Leuven, Belgium)

  • Yannick Van Landuyt

    (National Bank of Belgium, 1000 Brussels, Belgium)

  • Mathias Verreydt

    (Department of Financial Management, Faculty of Economics and Business, KU Leuven, 2000 Antwerp, Belgium)

Abstract

Although employment protection and employee remuneration has been shown to affect many aspects of a firm’s performance, evidence of their ability to explain firm failure is very limited. This paper examines the effect of different types of labor contracts and wages on the probability of corporate failure between 2012 and 2019 using a sample of 29,596 Belgian SMEs. Using discrete time hazard regression models, we find that the use of contract types with lower employment protection and paying lower wages are significant predictors of failure.

Suggested Citation

  • Nico Dewaelheyns & Cynthia Van Hulle & Yannick Van Landuyt & Mathias Verreydt, 2021. "Labor Contracts, Wages and SME Failure," Sustainability, MDPI, vol. 13(14), pages 1-15, July.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:14:p:7864-:d:594067
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