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Post-Entry Struggle for Life and Pre-Exit Shadow of Death from a Financial Perspective

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  • Kim P. Huynh
  • Robert J. Petrunia

Abstract

The success or failure of small, young, and private firms depends highly on the evolution of their financial position. This paper considers the post-entry/pre-exit adjustment process of firms, with focus on financial (debt-to-asset ratio) and labor productivity dynamics. Empirically examining financial relationships has been difficult, due to a lack of data on small, young, and private firms. We find that the post-entry struggle for life results in highly productive entrants reducing their leverage. Pre-exit dynamics see firm growth and relative firm size fall, with rising leverage. Increasing leverage hints at a shadow of death . Selection and survivor effects contribute to post-entry dynamics, while turnover and transition effects contribute to pre-exit dynamics.

Suggested Citation

  • Kim P. Huynh & Robert J. Petrunia, 2016. "Post-Entry Struggle for Life and Pre-Exit Shadow of Death from a Financial Perspective," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 23(1), pages 1-18, February.
    • Handle: RePEc:taf:ijecbs:v:23:y:2016:i:1:p:1-18
    DOI: 10.1080/13571516.2015.1084153
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    Cited by:

    1. Daniel Fackler & Claus Schnabel & Joachim Wagner, 2014. "Lingering illness or sudden death? Pre-exit employment developments in German establishments," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(4), pages 1121-1140.
    2. 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.
    3. Warusawitharana Missaka, 2018. "Profitability and the lifecycle of firms," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(2), pages 1-30, June.
    4. Livio Di Matteo & Robert Petrunia, 2022. "Does economic inequality breed murder? An empirical investigation of the relationship between economic inequality and homicide rates in Canadian provinces and CMAs," Empirical Economics, Springer, vol. 62(6), pages 2951-2988, June.

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