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Lack of Successors, Firm Default, and the Performance of Small Businesses

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  • TSURUTA Daisuke

Abstract

We investigate the effects of the lack of successors on small businesses with an elderly manager. Using firm-level data from Japan, which is a country with an ageing population, we find the following results. First, smaller, younger, highly leveraged, and non-growing firms are likely to have no successor. Second, firms with an elderly manager are more likely to exit and default if they have no successors, and this was particularly the case during the period of the global financial crisis around 2009. This result suggests that these firms have less incentive to repay debts because they are not going concerns. As a result of the high probability of default and exit, the annual rate of change in bank borrowing is low if firms with an elderly manager have no successor. Third, using the propensity score matching method, we find that sales growth for firms with no successor is lower than that for other firms.

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  • TSURUTA Daisuke, 2019. "Lack of Successors, Firm Default, and the Performance of Small Businesses," Discussion papers 19047, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:19047
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    Cited by:

    1. Kodama, Naomi & Murakami, Yoshiaki & Tanaka, Mari, 2021. "No Successor, No Success? Impact of a Little Son on Business Performance," Journal of the Japanese and International Economies, Elsevier, vol. 62(C).
    2. Miyakawa, Daisuke & Oikawa, Koki & Ueda, Kozo, 2021. "Firm Exit during the COVID-19 Pandemic: Evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 59(C).
    3. MIYAKAWA Daisuke & OIKAWA Koki & UEDA Kozo, 2022. "Misallocation under the Shadow of Death," Discussion papers 22014, Research Institute of Economy, Trade and Industry (RIETI).
    4. Peng XU, 2019. "Exit of Small Businesses: Differentiating between Insolvency, Voluntary Closures and M&A," Discussion papers 19051, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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