IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/1401.html
   My bibliography  Save this paper

Legal Form, Growth and Exit of West German Firms - Empirical Results for Manufacturing, Construction, Trade and Service Industries

Author

Listed:
  • Harhoff, Dietmar
  • Stahl, Konrad
  • Woywode, Michael

Abstract

In this paper we discuss determinants of firm survival and growth in Germany within its pre-1989 boundaries. We argue that the legal form adopted by a firm is an important indicator of the riskiness of projects undertaken, and that firms under limited liability should be characterized by higher than average insolvency and employment growth rates. We test these predictions by considering the survival chances and employment growth rates of various types of enterprises in a sample of approximately 11,000 West German firms from all major sectors of the German economy. We distinguish between voluntary liquidation without losses to creditors, and bankruptcy as forced liquidation. We demonstrate that firms under limited liability are characterized by higher growth and higher insolvency rates than comparable firms under full liability. Surprisingly, the likelihood of insolvencies is a non-monotonic function of firm size while the likelihood of voluntary liquidation decreases monotonically. Firms whose owners are approaching retirement age are characterized by relatively high hazards of voluntary liquidation, while the propensity to insolvency is not affected by the owner’s age. The basic empirical results hold in pooled samples as well as in estimates at the level of the one-digit industries of manufacturing, construction, trade, and services.

Suggested Citation

  • Harhoff, Dietmar & Stahl, Konrad & Woywode, Michael, 1996. "Legal Form, Growth and Exit of West German Firms - Empirical Results for Manufacturing, Construction, Trade and Service Industries," CEPR Discussion Papers 1401, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1401
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1401
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    More about this item

    Keywords

    Employment Growth; Exit; Insolvency; Limited Liability; Liquidation;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1401. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.