Patterns of Firm Survival in Estonia

Abstract

This paper examines patterns of firm survival in Estonia using a discrete time estimation approach with a complementary log-log hazard function. A firm is defined as sound if it meets the minimum capital requirement set by the law and distressed otherwise. Firms in default not only fall short of the required capital, but also exit. Evidence confirms the findings from other countries that firms face a higher risk of being distressed or in default during their start-up period than in later stages. Manufacturing firms are more robust than trade and services companies. Most important, however, firm survival depends positively on sales mark-up, high and stable asset returns, low leverage, and a large asset base.