K.U.Leuven - Departement toegepaste economische wetenschappen
DTEW Research Report 9809 pages:1-31
This paper examines the influence of operating activities and financial and investment decisions in the start-up year on post-entry survival. Using a logit estimation of a funds flow model, we compare starters that failed within nine years with those that did not fail. We find that in the first year failed firms typically generate less cash flows, incur higher labour expenses, use more trade credit and financial debt, and limit inventories. Industry characteristics also significantly influence the survival probability. The timing of the failure is mainly determined by the extend of financial debt and accounts payable in the first year.