Survival of Newly Founded Businesses: A Log-Logistic Model Approach

Based on a longitudinal database we test the "liability of adolescence" hypothesis which states that new firm hazard rates follow an inverted U-shaped pattern. That is, the hazard rate is low for the initial period; the end of adolescence is marked by a hazard maximum, from which the rate declines monotonically. We use a log-logistic model which shows that the "liability of adolescence" argument describes the hazard rates of new establishments for all two and three-digit industries fairly well. Further, the rate shows that the desegregation of industries matters, and considerable differences are found within and across two and three-digit low-, moderate- and high-tech industries. In assessing the effect of market environment conditions on risk we find that risk to be elevated in a relatively large number of two-digit low- and high-tech industries in the presence of scale economies, but it is substantially reduced in moderate-tech industries. By contrast, the hazard rate tends to be reduced for quite a large number of three-digit low-, moderate- and high-tech industries in comparison with the two-digit industries, indicating a longer adolescence. The influence of start-up size in reducing the hazard rate is apparently similar between two and three digit low-, moderate- and high-tech industries. The impact of market growth on the risk of failure is not much different for both two and three-digit low-, moderate- and high-tech industries.     

Corporate social responsibility and bank liquidity creation

Under the stakeholder theory hypothesis, reputable corporate social responsibility (CSR) banks are expected to attract more loans and deposits, which in turn strengthens their ability to create liquidity. Our findings support this view. Further analyses reveal that the positive effect of CSR on liquidity creation differs depending on bank size, bank capital, and type of financial crisis. In addition, deposit growth, loan growth, lending rate, and funding rate are potential channels through which CSR influences bank liquidity creation. The findings are not driven by an endogeneity issue.