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Persistence of initial debt in the long‐term employment dynamics of new firms

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  • Robert Petrunia

Abstract

. This paper investigates whether a firm's future growth is independent of its initial debt structure. The non‐parametric test consists of determining whether the conditional size distribution for firms surviving through early years of life depends upon debt‐to‐asset ratio at birth. Initially, I test for initial size dependence in the growth process by applying Pakes and Ericson (1998) procedure. I then test the hypothesis that initial debt‐to‐asset ratios are irrelevant to growth of ten‐year old manufacturing firms. I reject the null of independence, and find evidence of a non‐monotonic relationship between age ten conditional size and the initial debt‐to‐asset ratio. Ce texte examine la question à savoir si la croissance future d'une firme dépend de la structure initiale de sa dette. Le test non paramétrique consiste à détermine si la distribution conditionnelle de la taille des firmes qui survivent au cours des premières années dépend du ratio dette/actif à la naissance. L'auteur teste d'abord l'indépendance de la taille initiale et du processus de croissance à l'aide de la procédure de Pakes et Ericson (1998) et ensuite l'hypothèse que le ratio initial dette/actif n'est pas pertinent pour expliquer la croissance de firmes manufacturières qui ont survécu dix ans. L'hypothèse nulle d'indépendance est rejetée et on trouve trace d'une relation non monotone entre la taille conditionnelle à dix ans et le ratio initial de la dette sur l'actif.

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  • Robert Petrunia, 2007. "Persistence of initial debt in the long‐term employment dynamics of new firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(3), pages 861-880, August.
  • Handle: RePEc:wly:canjec:v:40:y:2007:i:3:p:861-880
    DOI: 10.1111/j.1365-2966.2007.00434.x
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    1. Dixon Jay & Petrunia Robert & Rollin Anne-Marie, 2018. "Studying Firm Growth Distributions with a Large Administrative Employment Database," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 238(3-4), pages 189-221, July.

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