Moving in and Out of Financial Distress: Evidence for Newly Founded Service Sector Firms

GEABA - Discussion Paper No. 01-07

36 Pages Posted: 24 May 2002

See all articles by Ulrich Kaiser

Ulrich Kaiser

University of Southern Denmark - Faculty of Social Sciences; Center for Economic and Business Research (CEBR); Centre for European Economic Research

Date Written: February 2001

Abstract

The determinants of transitions between different states of financial distress are analyzed using two versions of Markov chain models: a multinomial logit model without random effects and a multinomial logit model capturing such unobservable factors. The empirical analysis is based on a panel data set containing information on 15,538 East German firms founded between 1994 and 1999.

The estimation results indicate that the effect of limited liability depends upon firms' starting state, the existence of corporate shareholders improves firms' financial performance, multiple credit relationships have negative effects and product diversification as well as positive macroeconomic conditions improve firms' financial performance.

Keywords: financial distress, Markov chains, multinomial logit model, simulated maximum likelihood, random effects

JEL Classification: C15, C33, G33

Suggested Citation

Kaiser, Ulrich, Moving in and Out of Financial Distress: Evidence for Newly Founded Service Sector Firms (February 2001). GEABA - Discussion Paper No. 01-07. Available at SSRN: https://ssrn.com/abstract=310361 or http://dx.doi.org/10.2139/ssrn.310361

Ulrich Kaiser (Contact Author)

University of Southern Denmark - Faculty of Social Sciences ( email )

Campusvej 55
DK-5230 Odense M
Denmark

HOME PAGE: http://www.sam.sdu.dk/staff/uka

Center for Economic and Business Research (CEBR) ( email )

Porcelaenshaven, Bldg 65
DK-2000 Frederiksberg
Denmark

HOME PAGE: http://www.cebr.dk/uk

Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

HOME PAGE: http://www.zew.de/de/mitarbeiter/mitarbeiter.php3?action=mita&kurz=uka

Register to save articles to
your library

Register

Paper statistics

Downloads
169
Abstract Views
949
rank
178,246
PlumX Metrics