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Labor Contracts, Wages and SME Failure

Nico Dewaelheyns, Cynthia Van Hulle (), Yannick Van Landuyt () and Mathias Verreydt ()
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Cynthia Van Hulle: Department of Accountancy, Finance & Insurance, Faculty of Economics and Business, KU Leuven, 3000 Leuven, Belgium
Yannick Van Landuyt: National Bank of Belgium, 1000 Brussels, Belgium
Mathias Verreydt: Department of Financial Management, Faculty of Economics and Business, KU Leuven, 2000 Antwerp, Belgium

Sustainability, 2021, vol. 13, issue 14, 1-15

Abstract: Although employment protection and employee remuneration has been shown to affect many aspects of a firm’s performance, evidence of their ability to explain firm failure is very limited. This paper examines the effect of different types of labor contracts and wages on the probability of corporate failure between 2012 and 2019 using a sample of 29,596 Belgian SMEs. Using discrete time hazard regression models, we find that the use of contract types with lower employment protection and paying lower wages are significant predictors of failure.

Keywords: bankruptcy prediction; employment protection; human capital; hazard models (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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