Determination of Small Business Churn in Australia
10 Pages Posted: 19 Dec 2011 Last revised: 18 Jan 2012
Date Written: December 17, 2011
The annually increasing firm churn has significant financial, legal and social impacts on productivity, employment and economic growth in Australia. However, evidence of the impacts of firm churn is sparse. This paper undertakes a first-ever study that empirically investigates the determinants and their impacts on firm churn. This paper is innovative to the literature in four aspects: (1) Local Region Areas (LGAs) data, rarely available in other countries, has been used for the analysis; (2) using LGAs as the basic analytical unit is able to eliminate the heterogeneity problems encountered by other studies which are based on national and cross-national data; (3) panel data modeling techniques identify robust evidence; (4) systematic statistical tests guarantees the robustness of the results. The dataset, provided by Australia Bureau of Statistics, include 3462 observations of 577 Local Government Areas (LGAs) during 2004-2009. The research identifies variables positively and negatively affecting the churn and finds that size matters in determining business churn. The last section concludes with a discussion of limitations and future research directions.
Keywords: business churn, determinants, panel data, Australia
JEL Classification: D20, G38
Suggested Citation: Suggested Citation