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Determinants of Hazard Confronting New Entry: Does Financial Structure Matter?

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Abstract

This paper attempts to identify the determinants ofhazard confronting 219 new manufacturing firmsestablished in 1982–84 and followed up to1992 using a Cox regression model. Three sets ofvariables are combined in the analysis: firm, sectorand cohort specific. Financial, firm specificcharacteristics such as larger initial financialcapital size, conservative borrowing, heavier fixedasset commitment and lower diversification in terms ofholding other firms' assets are estimated to reducefirm hazard. Higher sectoral entry and lower sunk costsectoral requirements by increasing marketcontestability increase risk of failure together withcyclical variations.

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Authors and Affiliations

  1. Department of Economics, University of Thessaly, Argonafton & Filellinon St., 382 21, Volos, Greece

    Georgios Fotopoulos

  2. Athens University of Economics and Business, 76 Patission Street, Athens, 10434, Greece

    Helen Louri

Authors
  1. Georgios Fotopoulos
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  2. Helen Louri
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Fotopoulos, G., Louri, H. Determinants of Hazard Confronting New Entry: Does Financial Structure Matter?. Review of Industrial Organization 17, 285–300 (2000). https://doi.org/10.1023/A:1007862922531

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