Formation, Mortality and Firm Age Distribution in Selected States of India

Abstract

Firm age and its distribution is related to different parameters of an industry and economy. The shape of the firm age distribution can indicate firm mortality or survival. However, research on firm age distribution is scant in India. Theoretically, firms are ongoing entities, but in reality firms do die and they exhibit a higher mortality during initial years. Thus the risk of exit is higher at initial ages. So what is the behaviour across states? For this study the seven states - Bihar, Kerala, Haryana, Punjab, Odisha, Chhatisgargh and Jharkhand - have been selected according to the similarity in their levels of contribution to the GDP of India. The age data was calculated from the date of registration of the companies as available from the Ministry of Corporate affairs. These companies are active entities as indicated by the Ministry of Corporate Affairs database. All together 92,062 companies were considered for this study and it considers all available active companies as on 2015. Firstly, the statistics can be reasonably considered as parameters for the respective states. Secondly, most of firms are of micro, small and medium enterprise in nature, thus the age distribution characteristics reflect MSME sector as well. However, the data has not been segregated sector-wise. The findings indicate that age distribution closely reflects the status of economy and can serve as one of the indicators of business climate. Policy implications are also discussed in the paper.