Type of ownership and the creation of new enterprises in Navarre, Spain: differences in financial survival

Abstract

The purpose of this paper is to study whether there are differences in the financial survival, as measured by the degree of solvency and profitability, of very small firms, classified by type of ownership, whether Participatory Capitalist Firms (PCFs) or employee/Labour-Owned Firms (LOFs). The indexes measuring these two factors include return on assets, return of income, earnings before taxes, dividends and interest for profitability; the liquidity ratio for short-term solvency; and total solvency and an index of perceived risk for the static and dynamic aspects, respectively, of long-term solvency. The evidence suggests that LOFs tend to perform better in the short term, but fall behind in the long term.