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New Firm Survival: The Effects of Start‐up Characteristics
Author(s) -
Huyhebaert Nancy,
Gaeremynck Ann,
Roodhooft Filip,
Van de Gucht Linda M..
Publication year - 2000
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00328
Subject(s) - debt , cash flow , business , investment (military) , finance , monetary economics , economics , politics , political science , law
This paper empirically examines the influence of operating activities and financial and investment decisions in the start‐up year on post‐entry survival, taking industry effects into account. Compared to traditional financial ratios, we find that funds flow measures are superior in identifying those start‐up characteristics that are related to subsequent failure. In the first year, failed firms typically generate less cash flows, incur higher labour expenses, use more trade credit and financial debt, limit inventories and are cash constrained. Surprisingly, industry effects do not have a significant impact. From these results, we draw conclusions for public policy.