Business exit during the COVID-19 pandemic: Non-traditional measures in historical context

Crane, Leland D.; Decker, Ryan A.; Flaaen, Aaron; Hamins-Puertolas, Adrian; Kurz, C

doi:10.1016/j.jmacro.2022.103419

Cited by 44 publications

(29 citation statements)

References 40 publications

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“…Second, there is very little evidence on permanent closures (Crane et al, 2022 ). Because of the difficulty in finding timely panel data and measuring long-term business closures, the important question of whether small businesses permanently closed in disproportionate numbers in the pandemic remains unanswered in the literature.…”

Section: Introductionmentioning

confidence: 99%

“…2 Previous studies of closures in the pandemic Crane et al (2022) provide an overview of the small number of papers studying business closures during the early stages of the COVID-19 pandemic and potential data sources. They note that the statistics on business closures provided by the BLS and the Census Bureau (see below) are released with a time lag that is too long to inform timely policy responses.…”

Section: Introductionmentioning

confidence: 99%

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Were small businesses more likely to permanently close in the pandemic?

Fairlie

Fossen

Johnsen³

et al. 2022

Small Bus Econ

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Previous estimates indicate that COVID-19 led to a large drop in the number of operating businesses operating early in the pandemic, but surprisingly little is known on whether these shutdowns turned into permanent closures and whether small businesses were disproportionately hit. This paper provides the first analysis of permanent business closures using confidential administrative firm-level panel data covering the universe of businesses filing sales taxes from the California Department of Tax and Fee Administration. We find large increases in closure rates in the first two quarters of 2020, but a strong reversal of this trend in the third quarter of 2020. The increase in closures rates in the first two quarters of the pandemic was substantially larger for small businesses than large businesses, but the rebound in the third quarter was also larger. The disproportionate closing of small businesses led to a sharp concentration of market share among larger businesses as indicated by the Herfindahl–Hirschman Index with only a partial reversal after the initial increase. The findings highlight the fragility of small businesses during a large adverse shock and the consequences for the competitiveness of markets.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Were small businesses more likely to permanently close in the pandemic?

Fairlie

Fossen

Johnsen³

et al. 2022

Small Bus Econ

View full text Add to dashboard Cite

show abstract

“…After combining the enterprise survey and the follow-up three COVID surveys based on the unique ID number, the study defines the variable from the surveys. Crane et al (2022) argue that actual business exit is difficult to measure in real-time and business exit appears lower than widespread expectations from early in the COVID-19 pandemic. This study defines business failure as "the permanent or temporary closure" of business firms during the pandemic.…”

Section: Variables Specifications and Descriptive Statisticsmentioning

confidence: 93%

Do business strategies affect firms' survival during the COVID-19 pandemic? A global perspective

Islam

Fatema

2023

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PurposeThis study examines the survival probability of the firms during the COVID-19 pandemic and identifies the effects of pandemic-era business strategies on firm survival across sectors and sizes.Design/methodology/approachThis study combines World Bank Enterprise Survey data with three consecutive follow-up COVID-19 survey data. The COVID-19 surveys are the follow-up surveys of WBES, and they are done at different points of time during the pandemic. Both WBES and COVID-19 surveys follow the same sampling methods, and the data are merged based on the unique id number of the firms. The data covers 12,551 firms from 21 countries in different regions such as Africa, Latin America, Central Asia and the Middle East. The study applies Kaplan–Meier estimate to analyze the survival probability of the firms across sectors and sizes. The study then uses Cox non-parametric regression model to identify the effect of business strategies on the survival of the firms during the pandemic. The robustness of the Cox model is checked using the multilevel parametric regression model.FindingsThe study's findings suggest that a firm's survival probability decreases during the pandemic era. Manufacturing firms have a higher survival probability than service firms, whereas SMEs have a higher survival probability than large firms. During the pandemic period, business strategies significantly boost the probability of firm survival, and their impacts differ among firm sectors and sizes. Several firm-specific factors affect firm survival in different magnitudes and signs. Except in a few cases, the findings also indicate that one strategy positively moderates the influence of another strategy on firm survival during a pandemic.Originality/valueCOVID-19 pandemic has drastically affected the business across the globe. Firms adopted new business processes and strategies to face the challenges created by the pandemic. The critical research question is whether these pandemic-era business strategies ensure firms' survival. This study attempts to identify the effects of these business strategies on firms' survival, focusing on a comprehensive firm-level data set that includes firms from different sectors and sizes of countries from various regions.

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“…Second, there is very little evidence on permanent closures (Crane et al 2022). Because of the difficulty in finding timely panel data and measuring long-term business closures the important question of whether small businesses permanently closed in disproportionate numbers in the pandemic remains unanswered in the literature.…”

Section: Introductionmentioning

confidence: 99%

“…More generally, the results demonstrate the fragility of small businesses during a large adverse shock and the negative consequences for the competitiveness of markets. Crane et al (2022) provide an overview of the small number of papers studying business closures during the early stages of the COVID-19 pandemic and potential data sources. They note that the statistics on business closures provided by the Bureau of Labor Statistics (BLS) and the Census Bureau (see below) are released with a time lag that is too long to inform timely policy responses.…”

Section: Introductionmentioning

confidence: 99%

Were Small Businesses More Likely to Permanently Close in the Pandemic?

Fairlie¹,

Fossen²,

Johnsen³

et al. 2022

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We would like to thank Isabel Guzman at the California Governor's Office of Business and Development, and Irena Asmundson at the California Department of Finance for earlier help with the data. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the CDTFA. All results have been reviewed to ensure that no confidential information is disclosed. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Business exit during the COVID-19 pandemic: Non-traditional measures in historical context

Cited by 44 publications

References 40 publications

Were small businesses more likely to permanently close in the pandemic?

Were small businesses more likely to permanently close in the pandemic?

Do business strategies affect firms' survival during the COVID-19 pandemic? A global perspective

Were Small Businesses More Likely to Permanently Close in the Pandemic?

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