Kwansei Gakuin University Repository

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