Business Demography in Spain: Determinants of Firm Survival

The current paper uses a new database including firms created between 1995 and 2002 across all sectors of the business economy to study the determinants of new firm survival in Spain. We find that larger start-ups survive longer and that the probability of exit is larger in sectors with high entry rates and low concentration. One of the contributions of the paper is the inclusion of the initial firm's financial structure among the determinants of survival. Our results suggest that holding debt, instead of equity, has positive and important effects on survival up to some point. Beyond this point, further debt increments have a negative impact on survival, and this effect is more important the higher is the corresponding debt ratio or indebtedness of the firm.