The survival of newly-incorporated companies and founding director characteristics

Abstract

This article examines the failure path of newly-incorporated companies and determines the impact of founder director/board characteristics on survival. Hypotheses are tested regarding director characteristics within a discrete-time hazard model which controls for macro-economic conditions, recursive relationships and all non-insolvency exits. Regarding the estimation method, analysis of the variables’ average marginal effects is helpful in unravelling the subtleties of these effects, being used to confirm the magnitude and economic significance of the results. The study utilises a unique dataset of more than 5.8m company-year observations (near population) of newly-incorporated companies and early-stage board characteristics. Results suggest that the background, experience, networking, gender diversity and composition of new boards are important in determining the trajectory of success or failure of new firms.