The role of management decisions in explaining firm market exit

DSpace Repository

Show simple item record Došenović Bonča, Petra Ponikvar, Nina Pušnik, Ksenja Tajnikar, Maks
dc.contributor.other Ekonomická fakulta cs 2015-06-04 2015-06-04
dc.identifier.issn 12123609
dc.description.abstract We study factors of fi rm market exit and focus on the role of the fi rm’s management. We assume that the quality of decisions made by the fi rm’s management can be assessed by the firm’s technical and cost efficiency levels. We argue that the decisions of management are an important determinant of fi rm market exit and hypothesise that the characteristics of the macroeconomic environment infl uence the impact of technical and cost effi ciency on fi rm market exit. This is why we study whether the importance of decisions that are relevant for attaining technical effi ciency and decisions that contribute to cost effi ciency for firm market exit depend on the macroeconomic environment of the analysed fi rms. Such an analysis reveals which types of managerial decisions are relevant for fi rm market exit in differing macroeconomic environments. We use a logistic regression for rare events to estimate non-nested microeconomic models of fi rm market exit in Slovenia for two periods characterised by differing macroeconomic conditions. The results confirm that firms in which decisions of management result in inferior effi ciency are more likely to exit the market. Even though a fi rm’s management plays many relevant roles within the fi rm, our research demonstrates that those management decisions that refer to input selection and their substitution are those which are most crucial for preventing a fi rm from failing and ensuring its survival. We also fi nd that in differing macroeconomic environments different types of management decisions explain fi rm market exit. The results show that technical effi ciency has a more signifi cant infl uence on a fi rm’s market exit compared to cost effi ciency in a favourable macroeconomic environment, while cost effi ciency has a more signifi cant infl uence on a fi rm’s market exit than technical effi ciency in unfavourable macroeconomic conditions. en
dc.format text
dc.format.extent 103-116 s. cs
dc.language.iso en
dc.publisher Technická Univerzita v Liberci cs
dc.publisher Technical university of Liberec, Czech Republic en
dc.relation.ispartof Ekonomie a Management cs
dc.relation.ispartof Economics and Management en
dc.relation.isbasedon ZAJC KEJŽAR, K. The Role of Foreign Direct Investment in the Host-Country Firm Selection Process: Firm-Level Evidence from Slovenian Manufacturing. Review of World Economics. 2011, Vol. 147, Iss. 1, pp. 169-193. ISSN 1610-2886. DOI: s10290-010-0077-3.
dc.relation.isbasedon YEH, O.J. The Application of Data Envelopment Analysis in Conjunction with Financial Ratios for Bank Performance Evaluation. Journal of the Operational Research Society. 1996, Vol. 47, Iss. 8, pp. 980-988. ISSN 0160-5682. DOI:http://dx.doi. org/10.2307/3010406.
dc.relation.isbasedon WILLIAMSON, O.E. The Economic Institutions of Capitalism. New York: Free Press, 1985. ISBN 0-02-934820-X.
dc.relation.isbasedon WILLIAMS, M. Measuring Business Starts, Success and Survival: Some Database Considerations. Journal of Business Venturing. 1993, Vol. 8, Iss. 4, pp. 295-299. ISSN 0883- 9026. DOI: 9026(93)90001-l.
dc.relation.isbasedon WHEELOCK, D.C. and WILSON, P.W. Why Do Banks Disappear? The Determinants of US 2, XVIII, 2015 115 Business Administration and Management Bank Failures and Acquisitions. The Review of Economics and Statistics. 2000, Vol. 82, Iss. 1, pp. 127-138. ISSN 0034-6535. DOI:http://
dc.relation.isbasedon WATSON, J. and EVERTT, J.E. Do Small Businesses Have High Failure Rates? Journal of Small Business Management. 1996, Vol. 34, Iss. 4, pp. 45-52. ISSN 0047-2778.
dc.relation.isbasedon VUONG, Q. Likelihood Ratio Tests for Model Selection and Non-Nested Hypotheses. Econometrica. 1989, Vol. 57, Iss. 2, pp. 307- 333. ISSN 0012-9682. DOI:http://dx.doi. org/10.2307/1912557.
dc.relation.isbasedon TSIONAS, E.G. and PAPADOGONAS, T.A. Firm Exit and Technical Ineffi ciency. Empirical Economics. 2006, Vol. 31, pp. 535-548. ISSN 0377-7332. DOI: s00181-005-0045-2.
dc.relation.isbasedon THORNHILL, S. and AMIT, R. Learning about Failure: Bankruptcy, Firm Age and the Resource-Based View. Organization Science. 2003, Vol. 15, Iss. 5, pp. 497-509. ISSN 1047-7039. DOI: orsc.14.5.497.16761.
dc.relation.isbasedon TAJNIKAR, M. and PUŠNIK, K. The Effect of Technical and Cost Effi ciency on the Income Position of Firms in Tourism. In: GALETIĆ, L., ČAVLEK, N. (eds.). An Enterprise Odyssey: Tourism – Governance and Entrepreneurship – Proceedings. Zagreb: Faculty of Economics and Business, 2008. pp. 201-202.
dc.relation.isbasedon TAJNIKAR, M. Transitional Adjustment of Large Companies in Slovenia and Economic Policy. Post-Communist Economies. 2001, Vol. 13, Iss. 3, pp. 331- 344. ISSN 1463-1377. DOI:http://dx.doi. org/10.1080/14631370120074867.
dc.relation.isbasedon SHLEIFER, A. and VISHNY, R.W. Liquidation Value and Debt Capacity: A Market Equilibrium Approach. Journal of Finance. 1992, Vol. 47, Iss. 4, pp. 1343-1366. ISSN 0022- 1082. DOI:
dc.relation.isbasedon SCHUMPETER, J.A. The Theory of Economic Development. An Inquiry into Profi ts, Capital, Credit, Interest, and the Business Cycle. Cambridge: Harvard University Press, 1934. ISBN 0691042535.
dc.relation.isbasedon RAFTERY, A.E. Bayesian Model Selection in Social Research. In: MARSDEN, P.V. (ed.). Sociological Methodology. Oxford: Blackwell, 1995. pp. 111-163. DOI:http://dx.doi. org/10.2307/271063.
dc.relation.isbasedon PUŠNIK, K. and TAJNIKAR, M. Technical and Cost Effi ciencies as Determinants of Business Failures of Small Firms: The Case of Slovenia. Eastern European Economics. 2008, Vol. 46, Iss. 1, pp. 45-64. ISSN 0012- 8775. DOI: 8775460103.
dc.relation.isbasedon PUŠNIK, K. Dejavniki izstopa podjetij s trga na primeru Slovenije (Determinants of Firm Market Exit in the Case of Slovenia). Doctoral Dissertation. Ljubljana: Ekonomska fakulteta, 2008.
dc.relation.isbasedon PSILLAKI, M., TSOLAS, I.E. and MARGARITIS, D. Evaluation of Credit Risk Based on Firm Performance. European Journal of Operational Research. 2010, Vol. 201, Iss. 3, pp. 873-881. ISSN 0377-2217. DOI:http://
dc.relation.isbasedon PREMACHANDRA, I.M., BHABRA, G.S. and SUEYOSHI, T. DEA as a Tool for Bankruptcy Assessment: A Comparative Study with Logistic Regression Technique. European Journal of Operational Research. 2009, Vol. 193, Iss. 2, pp. 412-424. ISSN 0377-2217. DOI:http://dx.doi. org/10.1016/j.ejor.2007.11.036.
dc.relation.isbasedon POMPE, P. and BILDERBEEK, J. The Prediction of Bankruptcy of Small- and Medium-Sized Industrial Firms. Journal of Business Venturing. 2005, Vol. 20, Iss. 6, pp. 847-868. ISSN 0883-9026. DOI:http://dx.doi. org/10.1016/j.jbusvent.2004.07.003.
dc.relation.isbasedon PILLE, P. and PARADI, J.C. Financial Performance Analysis of Ontario (Canada) Credit Unions: An Application of DEA in the Regulatory Environment. European Journal of Operational Research. 2002, Vol. 139, Iss. 1/2, pp. 339-350. ISSN 0377-2217. DOI:http://
dc.relation.isbasedon PHILLIPS, B. and KIRCHHOFF, B.A. Formation, Growth and Survival; Small Firm Dynamics in the US Economy. Small Business Economics. 1989, Vol. 1, Iss. 1, pp. 65-74. ISSN 0921-898X. DOI: bf00389917.
dc.relation.isbasedon PENROSE, E.T. The Theory of the Growth of the Firm. New York: M. E. Sharpe, 1959. ISBN 978-0-19-828977-7. DOI:http://dx.doi. org/10.2307/3111440.
dc.relation.isbasedon PARADI, J.C., ASMILD, M. and SIMAK, M.C. Using DEA and Worst Practice DEA in Credit Risk Evaluation. Journal of Productivity Analysis. 2004, Vol. 21, Iss. 2, pp. 153-156. ISSN 0895-562X. DOI: b:prod.0000016870.47060.0b.
dc.relation.isbasedon PANZAR, J. Determinants of Firm and 114 2015, XVIII, 2 Ekonomika a management Industrial Structure. In: SCHMALENSEE, E., WILLING, R. (eds.). Handbook of Industrial Organization. North-Holland: Elsevier, 1989. pp. 3-59. DOI: 448x(89)01004-6.
dc.relation.isbasedon OPLER, T. and TITMAN, S. Financial Distress and Corporate Performance. Journal of Finance. 1994, Vol. 49, Iss. 3, pp. 1015- 1040. ISSN 0022-1082. DOI:http://dx.doi. org/10.1111/j.1540-6261.1994.tb00086.x.
dc.relation.isbasedon NUCCI, A.R. The Demography of Business Closings. Small Business Economics. 1999, Vol. 12, Iss. 1, pp. 25-39. ISSN 0921-898X. DOI:http://
dc.relation.isbasedon LUSSIER, R. A Startup Business Success versus Failure Prediction Model for the Retail Industry. The Mid-Atlantic Journal of Business. 1996, Vol. 32, Iss. 2, pp. 79-92. ISSN 0732-9334.
dc.relation.isbasedon KÖKE, J. Determinants of Acquisition and Failure: Evidence from Corporate Germany. Structural Change and Economic Dynamics. 2002, Vol. 13, Iss. 4, pp. 457-484. ISSN 0954- 349X. DOI: 349x(02)00024-3.
dc.relation.isbasedon KING, G. and ZENG, L. Logistic Regression in Rare Events Data. Political Analysis. 2001, Vol. 9, Iss. 2, pp. 137-163. ISSN 1047-1987. DOI: pan.a004868.
dc.relation.isbasedon KAO, C. and LIU, S. Predicting Bank Performance with Financial Forecasts: A Case of Taiwan Commercial Banks. Journal of Banking and Finance. 2004, Vol. 28, Iss. 10, pp. 2353-2368. ISSN 0378-4266. DOI:http://dx.doi. org/10.1016/j.jbankfi n.2003.09.008.
dc.relation.isbasedon JOVANOVIC, B. Firm Formation with Heterogeneous Management and Labor Skills. Small Business Economics. 1994, Vol. 6, Iss. 3, pp. 185-192. ISSN 0921-898X. DOI:http://
dc.relation.isbasedon JOVANOVIC, B. Selection and the Evolution of Industry. Econometrica. 1982, Vol. 50, pp. 649-670. ISSN 0012-9682. DOI:http://
dc.relation.isbasedon HARRIS, R.I.D. and LI, Q.C. Export-Market Dynamics and the Probability of Firm Closure: Evidence for the United Kingdom. Scottish Journal of Political Economy. 2010, Vol. 57, Iss. 2, pp. 145-168. ISSN 0036-9292. DOI:http://
dc.relation.isbasedon GIBRAT, R. Les Inegalites Economiques. Paris: Librairie du Recueil Sirey, 1931.
dc.relation.isbasedon FRIED, H.O., LOVELL, C.A.K. and SCHMIDT, S.S. The Measurement of Productive Effi ciency and Productivity Change. Oxford: Oxford University Press, 2008. ISBN 978- 0195183528. DOI: acprof:oso/9780195183528.001.0001.
dc.relation.isbasedon FREEMAN, J., CARROLL, G.R. and HANNAN, M.T. The Liability of Newness: Age Dependence in Organizational Death Rates. American Sociological Review. 1983, Vol. 48, pp. 692-710. ISSN 0003-1224. DOI:http://
dc.relation.isbasedon FOTOPOULOS, G. and LOURI, H. Location and Survival of New Entry. Small Business Economics. 2000, Vol. 14, Iss. 4, pp. 311-321. ISSN 0921-898X. DOI:http://dx.doi. org/10.1023/a:1008180522759.
dc.relation.isbasedon FOREMAN, R.D. A Logistic Analysis of Bankruptcy within the US Local Telecommunications Industry. Journal of Economics and Business. 2003, Vol. 55, Iss. 2, pp. 135-166. ISSN 0148-6195. DOI:http://
dc.relation.isbasedon FARRELL, M.J. The Measurement of Productive Effi ciency. Journal of the Royal Statistical Society. 1957, Vol. 120, Iss. 3, pp. 253-281. ISSN 0035-9238. DOI:http://dx.doi. org/10.2307/2343100.
dc.relation.isbasedon ERICSON, R. and PAKES, A. Markov- Perfect Industry Dynamics: A Framework for Empirical Work. Review of Economic Studies. 1995, Vol. 62, Iss. 1, pp. 53-82. ISSN 0034- 6527. DOI:
dc.relation.isbasedon DUNNE, P. and HUGHES, A. Age, Size, Growth and Survival: UK Companies in the 1980s. Journal of Industrial Economics. 1994, Vol. 42, Iss. 2, pp. 115-137. ISSN 0022-1821. DOI:
dc.relation.isbasedon DENIS, D.J. and DENIS, D.K. Causes of Financial distress Following Leveraged Capitalizations. Journal of Financial Economics. 1995, Vol. 37, Iss. 2, pp. 129-157. ISSN 0304- 405X. DOI: 405x(94)00792-y.
dc.relation.isbasedon CYBINSKI, P.J. and FORSTER, J. The Macroeconomic Environment and the Process of Business Failure: Explorations with US Firms in an Economically Volatile Period, 1974-1988. International Journal of Business and Economics. 2002, Vol. 2, Iss. 1, pp. 13-23. ISSN 1543-1614.
dc.relation.isbasedon COUCKE, K. and SLEUWAEGEN, L. Offshoring as a Survival Strategy: Evidence from Manufacturing Firms in Belgium. Journal of International Business Studies. 2008, Vol. 39, Iss. 8, pp. 1261-1277. ISSN 0047-2506. DOI:
dc.relation.isbasedon COASE, R. The Nature of the Firm. Economica. 1937, Vol. 4, Iss. 16, pp. 386- 405. ISSN 0013-0427. DOI:http://dx.doi. org/10.1111/j.1468-0335.1937.tb00002.x.
dc.relation.isbasedon CLARKE, K.A. Nonparametric Model Discrimination in International Relations. Journal of Confl ict Resolution. 2003, Vol. 47, Iss. 1, pp. 72-93. ISSN 0022-0027. DOI:http://
dc.relation.isbasedon CIELEN, A., PEETERS, L., VANHOOF, K. Bankruptcy Prediction Using a Data Envelopment Analysis. European Journal of Operational Research. 2004, Vol. 154, Iss. 2, pp. 526-532. ISSN 0377-2217. DOI:http://dx.doi. org/10.1016/s0377-2217(03)00186-3.
dc.relation.isbasedon CHURCHILL, N. and LEWIS, V. The Five Stages of Small Business Growth. Harvard Business Review. 1983, Vol. 61, Iss. May-June, pp. 30-50. ISSN 0017-8012.
dc.relation.isbasedon CHATTERJEE, S. and HADI, A.S. Regression Analysis by Example. 4th ed. New York: John Wiley and Sons, 2006. ISBN 978-0-470-05545-8. DOI:http://dx.doi. org/10.1002/0470055464.
dc.relation.isbasedon CEFIS, E. and MARSILI, O. A Matter of Life and Death: Innovation and Firm Survival. LEM Papers Series: 2005/01. Pisa: Laboratory of Economics and Management, 2005. DOI:http://
dc.relation.isbasedon CARROLL, G.R. A Stochastic Model of Organizational Mortality: Review and Analysis. Social Science Research. 1983, Vol. 12, Iss. 4, pp. 303-329. ISSN 0049-089X. DOI:http://
dc.relation.isbasedon BRÜDERL, J. and SCHÜSSLER, R. Organizational Mortality: The Liabilities of Newness and Adolescence. Administrative Science Quarterly. 1990, Vol. 35, Iss. 4, pp. 530-547. ISSN 0001-8392. DOI:http://dx.doi. org/10.2307/2393316.
dc.relation.isbasedon BREZIGAR-MASTEN, A., MASTEN, I. Comparison of Parametric, Semi-Parametric and Non-Parametric Methods in Bankruptcy Prediction. IMAD Working Paper Series: 6/2009. Ljubljana: IMAD, 2009.
dc.relation.isbasedon BHATTACHARJEE, A., HIGSON, C., HOLLY, S., KATTUMAN, P. Business Failure in UK and US Quoted Firms: Impact of Macroeconomic Instability and the Role of Legal Institutions. Cambridge Working Papers in Economics: 0420. Cambridge: Faculty of Economics, University of Cambridge, 2004.
dc.relation.isbasedon BHATTACHARJEE, A., HIGSON, C., HOLLY, S. and KATTUMAN, P. Macroeconomic Instability and Business Exit: Determinants of Failures and Acquisitions of Large UK Firms. Economica. 2009, Vol. 76, Iss. 301, pp. 108-131. ISSN 0013-0427. DOI:http://dx.doi. org/10.1111/j.1468-0335.2007.00662.x.
dc.relation.isbasedon BECCHETTI, L. and SIERRA, J. Bankruptcy Risk and Productive Efficiency in Manufacturing Companies. Journal of Banking and Finance. 2003, Vol. 27, Iss. 11, pp. 2099-2120. ISSN 0378-4266. DOI: s0378-4266(02)00319-9.
dc.relation.isbasedon BARR, R., SEIFORD, L. and SIEMS, T. An Envelopment Analysis Approach to Measuring the Managerial Efficiency of Banks. Annals of Operations Research. 1993, Vol. 45, Iss. 1, pp. 1-15. ISSN 0254-5330. DOI:http://dx.doi. org/10.1007/bf02282039.
dc.relation.isbasedon BARNEY, J. Firm Resources and Sustained Competitive Advantage. Journal of Management. 1991, Vol. 17, Iss. 1, pp. 99-120. ISSN 0149-2063. DOI:http://dx.doi. org/10.1177/014920639101700108.
dc.relation.isbasedon BAIN, J. Economies of Scale, Concentration and Entry. American Economic Review. 1954, Vol. 44, Iss. 1, pp. 15-39. ISSN 0002-8282.
dc.relation.isbasedon AUDRETSCH, D.B., MAHMOOD, T. New Firm Survival: New Results Using a Hazard Function. Review of Economics and Statistics. 1995, Vol. 77, Iss. 1, pp. 97-103. ISSN 0034- 6535. DOI:
dc.relation.isbasedon ARISTOVNIK, A. Short-term Determinants of Current Account Defi cits - Evidence from Eastern Europe and the Former Soviet Union. Eastern European Economics. 2008, Vol. 46, Iss. 1, pp. 24-42. ISSN 0012-8775. DOI:http://
dc.relation.isbasedon APPETITI, S. Identifying Unsound Firms in Italy. An Attempt to Use Trend Variables. Journal of Banking and Finance. 1984, Vol. 8, Iss. 2, pp. 269-279. ISSN 0378-4266. DOI:http://dx.doi. org/10.1016/0378-4266(84)90007-4.
dc.relation.isbasedon AKAIKE, H. Information Theory and an Extension of the Likelihood Ratio Principle. In: PETROV, B.N., CSAKI, F. (Eds.). Proceedings of the Second International Symposium on Information Theory. Budapest: Akademinai Kiado, 1973. pp. 267-281. DOI:http://dx.doi. org/10.1007/978-1-4612-0919-5_38.
dc.rights CC BY-NC
dc.subject banks en
dc.subject social responsibility en
dc.subject Croatia en
dc.subject.classification L10
dc.title The role of management decisions in explaining firm market exit en
dc.type Article en 2015-06-04
dc.publisher.abbreviation TUL
dc.relation.isrefereed true
dc.identifier.doi 10.15240/tul/001/2015-2-008
dc.identifier.eissn 2336-5604
local.relation.volume 18
local.relation.issue 2
local.relation.abbreviation E&M en
local.relation.abbreviation E+M cs
local.faculty Faculty of Economics
local.citation.spage 103
local.citation.epage 116
local.access open
local.fulltext yes

Files in this item

This item appears in the following Collection(s)

Show simple item record

Search DSpace

Advanced Search


My Account