Institutional Quality and Firm Survival
21 Pages Posted: 28 Apr 2011
Date Written: March 2011
The existing literature on firm survival focuses almost exclusively on firm- and industry-level determinants. What is generally overlooked, albeit extremely important for firm survival in developing countries, is the impact of institutional quality. Using data from manufacturing firms in China for the 1998-2005 period, we find that institutional quality has a significant and positive impact on the survival of private enterprises. Specifically, a one-standard-deviation increase in the security of property rights protection (the effectiveness of contract enforcement) leads to a 9.65 (6.2) percent decrease in the hazard rate of private enterprises. Our results are robust to the inclusion of both firm- and industry-level determinants and to various checks, such as alternative measures of institutional quality, different sub-samples, and different estimation methods.
Keywords: New firm survival, Institutional quality, Private enterprises
JEL Classification: M13, O43, L11
Suggested Citation: Suggested Citation