In this paper we study quality of management as a factor of firm market exit in differing macroeconomic environments. This aim is attained in two stages. First, we identify the set of factors impacting firm market exit. We focus on the impact of quality of management on firm market exit. Second, we analyse whether the set of market exit factors and their impact on firm market exit depend on the characteristics of the macroeconomic environment. Also in this case the role of quality of management is of special interest.
Our research is based on the premise that the quality of management is reflected in technical and cost efficiency of firms. Namely, in achieving technical and cost efficiency the key role is assigned to the ability of managers to influence the quantity of employed production inputs and to select such input combinations that minimise long run costs of production. In this paper we hypothesise that in a favourable macroeconomic environment cost efficiency has a prevailing role in explaining firm market exit. In a less favourable macroeconomic environment such a role is assigned to technical efficiency. Our research results will enable us to identify those macroeconomic policies and actions that support good managers in preventing business failure thereby decreasing firm market exit.
Methodology used in this paper is novel in researching firm market exit. We specify non-nested microeconomic models of firm market exit with four groups of market exit factors, i.e. internal, external, demographic and environmental factors. Such a categorisation of explanatory variables allows us to differentiate between those factors that can be influenced by firm management and are thus indicators of quality of management (e.g. input employment decisions) and those factors that are considered non-discretionary (e.g. firm’s market position, firm’s externally determined characteristics and environmental factors). We demonstrate that a model that includes technical and cost efficiency measures as proxies of quality of management statistically significantly explains firm market exit. Technical and cost efficiency measures are estimated using parametric stochastic frontier analysis. Models of firm market exit are estimated using logistic regression for rare events, based on a panel of population of Slovenian firms in two periods, i.e. 1995-1999 and 2000-2006. To identify the explanatory power of estimated models we use the classification test, Bayesian information criterion and artificial model nesting test.
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Датум:
15.06.2011.
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725
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