The role of financial constraints for alternative firm exit modes

Nina Ponikvar (), Katja Zajc Kejžar () and Darja Peljhan ()
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Nina Ponikvar: University of Ljubljana
Katja Zajc Kejžar: University of Ljubljana
Darja Peljhan: University of Ljubljana

Small Business Economics, 2018, vol. 51, issue 1, No 4, 85-103

Abstract: Abstract The paper proposes a new multidimensional instrument for measuring a firm’s latent financial constraints and tests it in explaining their heterogeneous impact on different firm exit routes. Applying the proposed measure to Slovenian manufacturing and service firms in the 2006–2012 period suggests three dimensions of firms’ financial constraints, i.e. liquidity, operational efficiency and profitability. Whereas the liquidity dimension is important for court-driven and law-based exits, the efficiency dimension is critical for firms’ voluntary liquidation, while profitability is for the relative likelihood of being merged or acquired. These effects of financial constraints on firm exit processes tend to be intensified during the crisis period. The results also confirm that SMEs differ systematically from larger firms in terms of the sensitivity of the exit decision to financial constraints for all but merger and acquisition (M&A) exit routes.

Keywords: Firm exit; Financial constraints; Bankruptcy; Liquidation; Mergers and acquisitions (M&A); Competing risk model (search for similar items in EconPapers)
JEL-codes: C25 G33 G34 L25 M21 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s11187-017-9918-y

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