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Business demography in Spain: determinants of firm survival

Author

Listed:
  • Paloma López-García

    (Banco de España)

  • Sergio Puente

    (Banco de España)

Abstract

The impact of entry upon market performance depends not only on the number of entries and their size, but also on how long do the firms last. Consequently, there are an increasing number of papers, most of them focused on the United States and restricted to the manufacturing sector, aimed at analysing the post entry performance of firms. Unfortunately, there is not much about this important topic in Spain due to the lack of appropriate longitudinal micro data on firms. The current paper aims to fill this gap by means of a new database covering all sectors of the business economy constructed at the Bank of Spain. We study the determinants of new firm survival using non parametric and parametric procedures especially designed to analyse duration phenomena. We find that larger start ups survive longer and that the probability of exit is larger in sectors with high entry rates and low concentration. One of the contributions of the paper is the inclusion of the initial firm's financial structure among the determinants of survival. Our results suggest that holding debt, instead of equity, has positive and important effects on survival up to some point. Beyond this point, further debt increments have a negative impact on survival, and this effect is more important the higher is the corresponding debt ratio or indebtness of the firm.

Suggested Citation

  • Paloma López-García & Sergio Puente, 2006. "Business demography in Spain: determinants of firm survival," Working Papers 0608, Banco de España.
  • Handle: RePEc:bde:wpaper:0608
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/06/Fic/dt0608e.pdf
    File Function: First version, April 2006
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    References listed on IDEAS

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    More about this item

    Keywords

    firm survival; entry and exit; micro-data;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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