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Determinants of firm sustainability in Estonia

Author

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  • Kadri Männasoo

Abstract

This paper examines the determinants of firm sustainability in Estonia using discrete-time survival analysis with a complementary log-log hazard function. A firm is defined as sustainable if it meets the minimum capital requirement set by the law, and if it does not then it is described as being "distressed". The definition of "in default" stipulates that not only must the firm be short of the required capital, but it should also have exited or dropped out altogether. This study confirms the stylized fact that firms face higher risk during their start-up period. Firm distress and default hazard decrease over time, the latter however, non-monotonically being lagged relative to distress. At the industry level, manufacturing firms demonstrate a higher degree of robustness compared to trade and services companies. Most importantly, however, firm sustainability positively depends on efficiency, good stable asset return, low leverage and a large assets base

Suggested Citation

  • Kadri Männasoo, 2007. "Determinants of firm sustainability in Estonia," Bank of Estonia Working Papers 2007-04, Bank of Estonia, revised 08 Mar 2007.
    • Handle: RePEc:eea:boewps:wp2007-04
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    File URL: http://www.eestipank.ee/sites/eestipank.ee/files/publication/en/WorkingPapers/2007/_wp_407.pdf
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    References listed on IDEAS

    as
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    5. Mr. Melvyn Weeks & Mr. Mark R. Stone, 2001. "Systemic Financial Crises, Balance Sheets, and Model Uncertainity," IMF Working Papers 2001/162, International Monetary Fund.
    6. Mario Cleves & William W. Gould & Roberto G. Gutierrez & Yulia Marchenko, 2010. "An Introduction to Survival Analysis Using Stata," Stata Press books, StataCorp LP, edition 3, number saus3, March.
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    Cited by:

    1. Aaro Hazak & Kadri Männasoo, 2007. "Indicators of corporate default : an EU based empirical study," Bank of Estonia Working Papers 2007-10, Bank of Estonia, revised 04 Sep 2007.

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    More about this item

    Keywords

    firm default; survival analysis;

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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