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DISCUSSION PAPER SERIES Discussion paper No. 64 Heterogeneous Exits: Evidence from New Firms Masatoshi Kato School of Economics, Kwansei Gakuin University Yuji Honjo Faculty of Commerce, Chuo University November, 2010 SCHOOL OF ECONOMICS KWANSEI GAKUIN UNIVERSITY 1-155 Uegahara Ichiban-cho Nishinomiya 662-8501, Japan
Heterogeneous Exits: Evidence from New Firms ∗ Masatoshi Kato †,‡ Yuji Honjo § Abstract This paper explores heterogeneous exits—bankruptcy, voluntary liquidation, and merger—by focusing on new firms. Using a sample of approximately 16,000 firms founded in Japan during 1997–2004, we examine the determinants of new-firm exit according to forms of exit. Regarding industry-specific characteristics, our findings indicate that new firms in capital-intensive and R&D-intensive industries are less likely to go bankrupt. In industries characterized by large amounts of capital and low price–cost margins, new firms are more likely to exit through voluntary liquidation and merger. Region-specific characteristics, such as regional agglomeration and unemployment rate, have significant effects on the hazards of exit, and their effects vary across different forms of exit. Moreover, we provide evidence that firm-specific characteristics, such as the number of employees, and entrepreneur-specific characteristics, such as educational background and age, play significantly different roles in determining each form of exit. Keywords: New firm; exit; bankruptcy; voluntary liquidation; merger; competing risks proportional hazards model. ∗ We wish to thank Sadao Nagaoka, Hiroyuki Odagiri, and Hiroyuki Okamuro for their helpful comments and advice. We also thank the participants at the CEI Seminar and IIR Summer School of Hitotsubashi University in Tokyo, the EARIE Annual Conference in Istanbul, the JEA Autumn Meeting in Hyogo, and the CAED Conference in London, in 2010, for their comments. In particular, we are grateful to Masayuki Morikawa for his useful suggestions, which significantly improved the paper. Financial support from the Japan Society for the Promotion of Science (Grant-in-Aid for Young Scientists (B) (No. 2173186) for the first author, and Grant-in-Aid for Scientific Research (C) (No. 20530215) for the second author) is gratefully acknowledged. Needless to say, any remaining errors are our own. † School of Economics, Kwansei Gakuin University Address : 1-155 Uegahara Ichiban-cho, Nishinomiya, Hyogo 662-8501, Japan E-mail : mkato@kwansei.ac.jp ‡ Institute of Economic Research, Hitotsubashi University Address : 2-1 Naka, Kunitachi, Tokyo 186-8603, Japan § Faculty of Commerce, Chuo University Address : 742-1 Higashinakano, Hachioji, Tokyo 192-0393, Japan E-mail : yhonjo@tamacc.chuo-u.ac.jp
Page 4 and 5: 1. Introduction Many new firms exit
Page 6 and 7: which is required to achieve econom
Page 8 and 9: how these environments shape each f
Page 10 and 11: 3. Data and method 3.1. Data source
Page 12 and 13: are regarded as bankrupt even if th
Page 14 and 15: holds for all situations. In additi
Page 16 and 17: assets to shipments in the year of
Page 18 and 19: exit of new firms of regional agglo
Page 20 and 21: cational background as a determinan
Page 22 and 23: 5.2. Estimation results Using the C
Page 24 and 25: umn (ii) of Table 5. This result su
Page 26 and 27: capital intensity does not have sig
Page 28 and 29: 6. Conclusions This paper has explo
Page 30 and 31: References Acs, Z. J., C. Armington
Page 32 and 33: Evans, D. S. (1987), ‘The relatio
Page 34 and 35: Nishimura, K. G., T. Nakajima, and
Page 36 and 37: Table 1: Summary statistics for the
Page 38 and 39: Table 3: The definitions of indepen
Page 40: Table 5: Estimation results Forms o

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