Impact of Sector and Region on Survival and Closure

Authors

  •   Brajaballav Kar Associate Professor, School of Management, KIIT Deemed to be University, Patia - 751 024, Bhubaneshwar, Odisha
  •   Piyusa Pritiparnna Das Assistant Professor, Marketing, School of Management, KIIT Deemed to be University, Patia - 751 024, Bhubaneshwar, Odisha

DOI:

https://doi.org/10.17010/ijf/2022/v16i2/160397

Keywords:

Firm

, Age, Survival, Mortality, Life Cycle Theory.

JEL Classification Codes

, L00, L60, L70, L80, L90.

Paper Submission Date

, May 15, 2021, Paper Sent Back for Revision, January 20, 2022, Paper Acceptance Date, January 30, Paper Published Online, February 15, 2022.

Abstract

The objective of the study was to explore the mortality of companies across sectors and regions in India. Using a public dataset available from the Ministry of Corporate Affairs of India, we explored the survival and closure age distribution of Indian companies, specifically the variation of closure across different sectors and regions. First, the study found that the age distribution of companies’ surviving and closed had no significant difference. Secondly, the closure age distributions of different sectors and regions had significant differences. The number of companies and the span of ages is sufficiently large to claim the generalizability of the findings for India. The article contributes to the literature by extending the industry life cycle theory.

Downloads

Download data is not yet available.

Author Biographies

Brajaballav Kar, Associate Professor, School of Management, KIIT Deemed to be University, Patia - 751 024, Bhubaneshwar, Odisha

Associate Professor

School of Management

 

ORCID iD : https://orcid.org/0000-0002-2127-1147

Piyusa Pritiparnna Das, Assistant Professor, Marketing, School of Management, KIIT Deemed to be University, Patia - 751 024, Bhubaneshwar, Odisha

ORCID iD : https://orcid.org/0000-0002-7027-9452

Downloads

Published

2022-02-14

How to Cite

Kar, B., & Das, P. P. (2022). Impact of Sector and Region on Survival and Closure. Indian Journal of Finance, 16(2), 8–23. https://doi.org/10.17010/ijf/2022/v16i2/160397

Issue

Volume 16, Issue 2, February 2022

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

References

Agarwal, R., & Gort, M. (2002). Firm and product life cycles and firm survival. American Economic Review, 92(2), 184–190. https://doi.org/10.1257/000282802320189221

Aguilar Rascón, O. C., & Velázquez, R. P. (2019). Factors that determine the closure or jeopardize the continuity of a micro and small enterprise. Organizations and Markets in Emerging Economies, 10(1), 78–91. https://doi.org/10.15388/omee.2019.10.00004

Ahad, N. A., & Yahaya, S. S. (2014). Sensitivity analysis of Welch’s t-test. AIP Conference Proceedings, 1605(1), 888–893. https://doi.org/10.1063/1.4887707

Ahn, S.-Y. (2018). Founder succession, the imprint of founders’ legacies, and long-term corporate survival. Sustainability, 10(5), 1485. https://doi.org/10.3390/su10051485

Ahuja, B. R., & Singhal, N. (2014). Assessing the financial soundness of companies with special reference to the Indian textile sector: An application of the Altman-Z score model. Indian Journal of Finance, 8(4), 38–48. https://doi.org/10.17010/ijf/2014/v8i4/71922

Amorim Varum, C., & Rocha, V. C. (2012). The effect of crises on firm exit and the moderating effect of firm size. Economics Letters, 114(1), 94–97. https://doi.org/10.1016/j.econlet.2011.09.015

Bhattacharya, U., Borisov, A., & Yu, X. (2015). Firm mortality and natal financial care. Journal of Financial and Quantitative Analysis, 50(1–2), 61–88. https://doi.org/10.1017/S0022109014000581

Blitz, A. (2018). Corporate life and death: Who succumbs, who survives during disruption? Journal of Business Strategy, 41(6), 11–17. https://doi.org/10.1108/JBS-07-2018-0122

Brown, M. B., & Forsythe, A. B. (1974). The small sample behavior of some statistics which test the equality of several means. Technometrics, 16(1), 129–132. https://doi.org/10.1080/00401706.1974.10489158

Carlisle, E., & Flynn, D. (2005). Small business survival in China: Guanxi, legitimacy, and social capital. Journal of Developmental Entrepreneurship, 10(1), 79–96. https://doi.org/10.1142/S1084946705000070

Cefis, E., & Marsili, O. (2019). Good times, bad times : Innovation and survival over the business cycle. Industrial and Corporate Change, 28(3), 565–587. https://doi.org/10.1093/icc/dty072

Central Statistical Organization. (2008). National Industrial Classification. https://www.ncs.gov.in/Documents/NIC_Sector.pdf

Chitta, S., Jain, R. K., & Sriharsha, R. (2019). Financial soundness of Maharatna companies: Application of Altman Z score model. Indian Journal of Finance, 13(10),22–33. https://doi.org/10.17010/ijf/2019/v13i10/147745

Daepp, M. I., Hamilton, M. J., West, G. B., & Bettencourt, L. M. (2015). The mortality of companies. Journal of the Royal Society Interface, 12(106), 1–8. https://doi.org/10.1098/rsif.2015.0120

Esteve-Pérez, S., Pieri, F., & Rodriguez, D. (2018). Age and productivity as determinants of firm survival over the industry life cycle. Industry and Innovation, 25(2), 167–198. https://doi.org/10.1080/13662716.2017.1291329

Geroski, P. A., Mata, J., & Portugal, P. (2009). Founding conditions and the survival of new firms. Strategic Management Journal, 31(5), 510–529. https://doi.org/10.1002/smj.823

Jain, N., & Bothra, N. (2016). Financial performance of the luxury market: A study of pre and post financial crisis 2007–08. Indian Journal of Finance, 10(1), 28–40. https://doi.org/10.17010/ijf/2016/v10i1/85841

Josefy, M. A., Harrison, J. S., Sirmon, D. G., & Carnes, C. (2017). Living and dying: Synthesizing the literature on firm survival and failure across stages of development. Academy of Management Annals, 11(2), 770–799. https://doi.org/10.5465/annals.2015.0148

Kar, B. (2016). Age pyramid of firms in North-Eastern States of India. Small Enterprises Development, Management & Extension Journal, 43(3), 17–34.

Kar, B. (2018). Formation, mortality and firm age distribution in selected states of India. https://doi.org/10.2139/ssrn.3294172

Kar, B., & Jena, M. K. (2017). Firms, age and exponents: Understanding the distribution. Siddhant- A Journal of Decision Making, 17(2), 133–141. https://doi.org/10.5958/2231-0657.2017.00016.7

Kar, B., & Jena, M. K. (2019). Performance and age of companies listed on the Bombay Stock Exchange. Indian Journal of Finance, 13(5), 52–67. https://doi.org/10.17010/IJF/2019/V13I5/144185

Klapper, L., & Richmond, C. (2011). Patterns of business creation, survival and growth: Evidence from Africa. Labour Economics, 18(Supplement 1), S32–S44. https://doi.org/10.1016/j.labeco.2011.09.004

Lee, S., & Lee, D. K. (2018). What is the proper way to apply the multiple comparison test? Korean Journal of Anesthesiology, 71(5), 353 – 360. https://doi.org/10.4097/kja.d.18.00242

Loderer, C., Neusser, K., & Waelchli, U. (2009). Firm age and survival. https://efmaefm.org/0efmameetings/efma annual meetings/2010-Aarhus old/EFMA2010_0280_fullpaper.pdf

Manzato, G. G., Arentze, T. A., Timmermans, H. J., & Ettema, D. (2011). Exploration of location influences on firm survival rates with parametric duration models. Transportation Research Record, 2245(1), 124 –130. https://doi.org/10.3141/2245-15

Ministry of Corporate Affairs, Government of India. (n.d.a). Companies Act, 2013. https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/acts.html?act=NTk2MQ==#Dormant_Company

Ministry of Corporate Affairs, Government of India. (n.d.b). Ministry of Corporate Affairs - Close company. https://www.mca.gov.in/MinistryV2/closecompany.html

Narender, M., & Kumar, A. (2021). IndiGo - In the times of pandemic. Indian Journal of Finance, 15(2), 62–70. https://doi.org/10.17010/ijf/2021/v15i2/157640

Over 6.8 lakh Indian companies shut so far: Government. (2019, July 1). The Economic Times.https://economictimes.indiatimes.com/news/economy/indicators/over-6-8-lakh-indian-companies-shut-so-far-government/articleshow/70026278.cms

Pole, P., Asawa, A., & Shah, D. (2014). A critical evaluation of the SKS Microfinance Fiasco. Indian Journal of Finance, 8(6), 7–21. https://doi.org/10.17010/ijf/2014/v8i6/71907

Reeves, M., Levin, S., & Ueda, D. (2016). The biology of corporate survival. Harvard Business Review, 94(1), p.2.

Rieckhof, R. (2017). The life cycle metaphor: Its emergence, understanding, and conceptualisation in business research. Uwf (Umwelt Wirtschafts Forum), 25(1–2), 91–107. https://doi.org/10.1007/s00550-017-0455-6

Roh, T. W. (2015). Does doing good make a firm live longer? : A study on slack resources, corporate giving, and corporate survival. Journal of International Trade & Commerce, 13(5), 109–124.

Rudy, B. C., & Johnson, A. F. (2017). Would you mind tossing me that life preserver? Corporate political activity and firm survival. In, Academy of Management Proceedings, 2017(1), p. 10984. https://doi.org/10.5465/ambpp.2017.10984abstract

Simón-Moya, V., Revuelto-Taboada, L., & Ribeiro-Soriano, D. (2012). Are success and survival factors the same for social and business ventures? Service Business, 6(2), 219–242. https://doi.org/10.1007/s11628-012-0133-2

Sonmez, A. (2013). Academic Journal of Interdisciplinary Studies. Academic Journal of Interdisciplinary Studies, 2(9), 160–167.

Tandon, S. (2016). Survival and death in the Indian corporate sector. In, Dead firms: Causes and effects of cross-border corporate insolvency (Advanced Series in Management (Vol. 15, pp. 77–111)). Emerald Group Publishing Ltd. https://doi.org/10.1108/S1877-636120160000015004

Van Wissen, L. J. (2002). Demography of the firm: A useful metaphor? European Journal of Population, 18(3), 263–279. https://doi.org/10.1023/A:1019750727018

Wang, L. (2017). Time and space in business: Dynamic geographic concentration and localized industry life cycle. Journal of Strategy and Management, 10(4), 374–400. https://doi.org/10.1108/JSMA-10-2015-0084

Wang, L., Tan, J., & Li, W. (2018). The impacts of spatial positioning on regional new venture creation and firm mortality over the industry life cycle. Journal of Business Research, 86, 41–52. https://doi.org/10.1016/j.jbusres.2018.01.020