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Factors Affecting Survival, Closure and M&A Exit for Small Businesses

49 Pages Posted: 28 Feb 2011 Last revised: 5 Jun 2013

Susan Coleman

University of Hartford - Barney School of Business

Carmen Cotei

University of Hartford - Department of Economics, Finance & Insurance

Joseph B. Farhat

Central Connecticut State University - Department of Finance

Date Written: November 1, 2010

Abstract

We examine new firms created in 2004 and track their business status in the following four years using the Kauffman Firm Survey data. For firms that exited the sample during the 2004-2008 period, we distinguish between voluntary firm closure in the form of merger or acquisition and compulsory firm closure in the form of failure/permanently closed operations. We apply duration analysis with competing risks to test the effect of owner, business and industry characteristics on firm survival, closure and exit through M&A. The results show that by not taking into account the reason for exit (M&A versus permanently closed operations) we underestimate survival rates. In addition, factors that characterize closed businesses are different from those that characterize businesses that were sold or merged with other businesses.

Suggested Citation

Coleman, Susan and Cotei, Carmen and Farhat, Joseph B., Factors Affecting Survival, Closure and M&A Exit for Small Businesses (November 1, 2010). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1768728 or http://dx.doi.org/10.2139/ssrn.1768728

Susan Coleman

University of Hartford - Barney School of Business ( email )

200 Bloomfield Ave
West Hartford, CT 06117
United States
(860) 768 4690 (Phone)

Carmen Cotei

University of Hartford - Department of Economics, Finance & Insurance ( email )

United States

Joseph Farhat (Contact Author)

Central Connecticut State University - Department of Finance ( email )

1615 Stanley Street
New Britian, CT 06050
United States

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