Which firms survive in a crisis? Corporate dynamics in Greece 2001-2014

Using a panel dataset of more than 40,000 Greek corporations over the period 2001- 2014, the paper examines how their size measured by past turnover affects survival prospects and turnover growth. The analysis is carried out along three dimensions: (a) time-wise, by looking at the dynamics before and after the crisis in 2010; (b) sector-wise, by grouping firms in six areas of economic activity, namely manufacturing, construction, trade, recreation, real-estate, and the combined sectors of transport & communications; (c) region-wise, by examining firms in Northern Greece, the wider Attiki region, and the rest of the country. Other firm’s characteristics like age, market share, leverage, and fixed asset ratio are also used as explanatory variables in the econometric estimation. Investigation takes place in the framework known in the literature as the Gibrat’s Law, according to which market turnover is a random walk process and larger-size firms belong to the same population with smaller ones. Our findings suggest that in Greece larger-size firms were, in general, more likely to survive in the market than smaller ones and this relative advantage grew stronger during the crisis. Focusing on sectors, it is established that large companies in the manufacturing sector are by far more robust over the cycle, while those in the Real Estate and construction sectors manifest the highest extinction rate. Moreover, the rate of turnover growth for those firms survived is found to be negatively associated with their size, thus not confirming Gibrat’s Law in Greece.