The Survival of Newly Incorporated Companies and the Impact of Founding Director Characteristics

47 Pages Posted: 18 Sep 2011

See all articles by Nick Wilson

Nick Wilson

University of Leeds - Credit Management Research Centre; Leeds University Business School

Ali Altanlar

University of Leeds - Credit Management Research Centre; University of Leeds - Division of Accounting and Finance

Date Written: September 17, 2011

Abstract

The founding directors of newly incorporated companies bring social capital (reputation, networks, business relationships) and human capital (task-related, professional and director experience) to a new venture and founding boards vary in degree of heterogeneity (size, diversity, turnover). This paper is exploratory and seeks to uncover new insights relating to the link between the characteristics of the board of directors of newly incorporated firms and the likelihood of company survival in the early years. Hypotheses are tested within a discrete-time duration-dependent (competing risks) hazard model which controls for macro-economic conditions and likely recursive relationships. Analyses of sub-sample marginal effects are used to confirm the magnitude and economic significance of our results. The study utilizes a unique and considerable dataset of over 5.8 million company-year observations (near population) of newly incorporated companies and early stage board characteristics. Results suggest that the background, experience, networking, diversity and composition of new boards are important in determining the trajectory of success/failure of new firms.

Keywords: Business failure, firm survival, corporate insolvency, board of directors, social and human capital, new ventures

JEL Classification: G24, G32, G33, C25, C24

Suggested Citation

Wilson, Nicholas and Altanlar, Ali, The Survival of Newly Incorporated Companies and the Impact of Founding Director Characteristics (September 17, 2011). Available at SSRN: https://ssrn.com/abstract=1929398 or http://dx.doi.org/10.2139/ssrn.1929398

Nicholas Wilson (Contact Author)

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Leeds University Business School ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Ali Altanlar

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
004478 1638 9654 (Phone)
004411 3384 5846 (Fax)

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom

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