Legal Form, Growth and Exit of West German Firms - Empirical Results for Manufacturing, Construction, Trade and Service Industries

Using a sample of approximately 11,000 West German firms from all major sectors of the economy, the authors test predictions on the relationship between legal form, firm survival, and employment growth. In their tests, the authors distinguish between voluntary liquidation without losses to creditors and bankruptcy, that is forced liquidation. They demonstrate that, in all sectors, firms under limited liability have higher growth and higher insolvency rates than comparable firms under full liability. Firms whose owners are approaching retirement age are characterized by relatively high hazards of voluntary liquidation, while the propensity to declare insolvency is not affected by the owner's age. Copyright 1998 by Blackwell Publishing Ltd

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