The Shadow of Death – An Emperical Analysis of the Pre-Exit Performance of New German Firms

Abstract

This paper makes an empirical contribution to the confirmation of the stylized fact that the performance of firms deteriorates in the years before exit. For this reason it is evaluated whether market exits differ significantly in their employment development in the years before market drop-out compared to surviving firms that have been selected using a non-parametric matching approach. The comparison of the employment growth rates among both groups reveals that the matched surviving firms experience higher growth rates compared to their exiting counterparts up to three years before market exit. Moreover, differences exist between Eastern and Western Germany due to various reasons.