Skip to main content Accessibility help

Firm Mortality and Natal Financial Care

  • Utpal Bhattacharya (a1), Alexander Borisov (a2) and Xiaoyun Yu (a3)


We construct a mortality table for U.S. public companies during 1985–2006. We find that the age-specific mortality rates of firms initially increase, peaking at age three, and then decrease with age, implying that the first 3 years of public life are critical. Financial intermediaries involved around the “public birth” of a firm (e.g., venture capitalists (VCs) and high-quality underwriters) are associated with lower firm mortality rates, sometimes for up to 7 years after the initial public offering (IPO). VCs reduce mortality rates more through natal financial care than through selection, whereas high-quality underwriters affect firm mortality more through selection.


Corresponding author

*Corresponding author:


Hide All
Agarwal, R., and Gort, M.. “Firm and Product Life Cycles and Firm Survival.” American Economic Review, 92 (2002), 184190.
Aggarwal, R. “Stabilization Activities by Underwriters after Initial Public Offerings.” Journal of Finance, 55 (2000), 10751103.
Altman, E. I. “Financial Ratios, Discriminant Analysis, and the Prediction of Corporate Bankruptcy.” Journal of Finance, 23 (1968), 589609.
Audretsch, D. “New Firm Survival and the Technological Regime.” Review of Economics and Statistics, 73 (1991), 441450.
Beatty, R., and Welch, I.. “Issuer Expenses and Legal Liability in Initial Public Offerings.” Journal of Law and Economics, 39 (1996), 545603.
Bhattacharya, U., and Daouk, H.. “When No Law Is Better than a Good Law.” Review of Finance, 13 (2009), 577627.
Carter, R. B.; Dark, F. H.; and Singh, A. K.. “Underwriter Reputation, Initial Returns, and the Long-Run Performance of IPO Stocks.” Journal of Finance, 53 (1998), 285311.
Carter, R. B., and Manaster, S.. “Initial Public Offerings and Underwriter Reputation.” Journal of Finance, 45 (1990), 10451068.
Chemmanur, T.; Krishnan, K.; and Nandy, D.. “How Does Venture Capital Financing Improve Efficiency in Private Firms? A Look Beneath the Surface.” Review of Financial Studies, 24 (2011), 40374090.
Cliff, M. T., and Denis, D. J.. “Do Initial Public Offering Firms Purchase Analyst Coverage with Underpricing?” Journal of Finance, 59 (2004), 28712901.
Degeorge, F.; Derrien, F.; and Womack, K. L.. “Analyst Hype in IPOs: Explaining the Popularity of Bookbuilding.” Review of Financial Studies, 20 (2007), 10211058.
Du, Q. “Birds of Feather or Celebrating Differences? The Formation and Impact of Venture Capital Syndication.” Working Paper, Shanghai Advanced Institute of Finance (2013).
Fama, E., and French, K.. “New Lists: Fundamentals and Survival Rates.” Journal of Financial Economics, 73 (2004), 229269.
Francis, J.; Schipper, K.; and Vincent, L.. “Earnings and Dividend Informativeness When Cash Flow Rights Are Separated from Voting Rights.” Journal of Accounting and Economics, 39 (2005), 329360.
Glennon, D., and Nigro, P.. “Measuring the Default Risk of Small Business Loans: A Survival Analysis Approach.” Journal of Money, Credit, and Banking, 37 (2005), 923947.
Gompers, P. “Optimal Investment, Monitoring, and the Staging of Venture Capital.” Journal of Finance, 50 (1995), 14611489.
Gompers, P.; Kovner, A.; and Lerner, J.. “Specialization and Success: Evidence from Venture Capital.” Journal of Economics & Management Strategy, 18 (2009), 817844.
Gompers, P., and Lerner, J.. The Venture Capital Cycle. Cambridge, MA: MIT Press (1999).
Graunt, J. Natural and Political Observations Mentioned in a Following Index and Made Upon the Bills of Mortality. London: Tho. Roycroft for John Martin, James Allestry, and Tho. Dicas (1662).
Hanley, K. W.; Kumar, A.; and Seguin, P. J.. “Price Stabilization in the Market for New Issues.” Journal of Financial Economics, 34 (1993), 177198.
Heckman, J. J. “Sample Selection Bias as a Specification Error.” Econometrica, 47 (1979), 153161.
Heinze, G., and Schemper, M.. “Comparing the Importance of Prognostic Factors in Cox and Logistic Regression Using SAS.” Computer Methods and Programs in Biomedicine, 71 (2003), 155163.
Hellmann, T., and Puri, M.. “Venture Capital and Professionalization of Start-Up Firms: Empirical Evidence.” Journal of Finance, 57 (2002), 169197.
Jain, B. A., and Kini, O.. “Does the Presence of Venture Capitalists Improve the Survival Profile of IPO Firms?” Journal of Business Finance and Accounting, 27 (2000), 11391176.
Krishnan, C. N. V.; Ivanov, V. I.; Masulis, R. W.; and Singh, A. K.. “Venture Capital Reputation, Post-IPO Performance and Corporate Governance.” Journal of Financial and Quantitative Analysis, 46 (2011), 12951333.
Lee, G., and Masulis, R. W.. “Do More Reputable Financial Institutions Reduce Earnings Management by IPO Issuers?” Journal of Corporate Finance, 17 (2011), 9821000.
Lee, P., and Wahal, S.. “Grandstanding, Certification and the Underpricing of Venture Capital Backed IPOs.” Journal of Financial Economics, 73 (2004), 375407.
Lerner, J. “Venture Capitalists and the Oversight of Private Firms.” Journal of Finance, 50 (1995), 301318.
Li, K., and Prabhala, N. R.. “Self-Selection Models in Corporate Finance.” In Handbook of Corporate Finance: Empirical Corporate Finance, Vol. I, Eckbo, B. E., ed. Amsterdam, The Netherlands: Elsevier, North-Holland (2007), 3786.
Li, X., and Masulis, R. W.. “How Do Venture Investments by Different Classes of Financial Institutions Affect the Equity Underwriting Process?” Working Paper, Vanderbilt University (2007).
Liu, X., and Ritter, J. R.. “Local Underwriter Oligopolies and IPO Underpricing.” Journal of Financial Economics, 102 (2011), 579601.
Ljungqvist, A.; Marston, F.; and Wilhelm, W. J. Jr. “Competing for Securities Underwriting Mandates: Banking Relationships and Analyst Recommendations.” Journal of Finance, 61 (2006), 301340.
Loderer, C. F.; Neusser, K.; and Waelchli, U.. “Firm Age and Survival.” Working Paper, University of Berne (2009).
Loughran, T., and Ritter, J. R.. “Why Has IPO Underpricing Changed over Time?” Financial Management, 33 (2004), 537.
Mittlboeck, M., and Schemper, M.. “Explained Variation for Logistic Regression.” Statistics in Medicine, 15 (1996), 19871997.
Morris, J. R. “Life and Death of Businesses: A Review of Research on Firm Mortality.” Journal of Business Valuation and Economic Loss Analysis, 4 (2009), 139.
Myers, J. “Conservative Accounting and Finite Firm Life: Why Residual Income Valuation Estimates Understate Stock Price.” Working Paper, University of Arkansas (1999).
Nahata, R. “Venture Capital Reputation and Investment Performance.” Journal of Financial Economics, 90 (2008), 127151.
Norton, E. C.; Wang, H.; and Ai, C.. “Computing Interaction Effects and Standard Errors in Logit and Probit Models.” Stata Journal, 4 (2004), 154167.
Puri, M., and Zarutskie, R.. “On the Life Cycle Dynamics of Venture-Capital- and Non-Venture-Capital-Financed Firms.” Journal of Finance, 67 (2012), 22472293.
Queen, M., and Roll, R.. “Firm Mortality: Using Market Indicators to Predict Survival.” Financial Analysts Journal, 43 (1987), 926.
Ross, S.; Westerfield, R.; and Jordan, B.. Fundamentals of Corporate Finance, 9th ed. New York, NY: McGraw-Hill/Irwin (2009).
Schemper, M. “The Relative Importance of Prognostic Factors in Studies of Survival.” Statistics in Medicine, 12 (1993), 23772382.
Shumway, T. “Forecasting Bankruptcy More Accurately: A Simple Hazard Model.” Journal of Business, 74 (2001), 101124.
Sorensen, M. “How Smart Is Smart Money? A Two-Sided Matching Model of Venture Capital.” Journal of Finance, 62 (2007), 27252762.
Strebulaev, I. A., and Yang, B.. “The Mystery of Zero-Leverage Firms.” Journal of Financial Economics, 109 (2013), 123.
Sufi, A. “Bank Lines of Credit in Corporate Finance: An Empirical Analysis.” Review of Financial Studies, 22 (2009), 10571088.
Thompson, S. B. “Simple Formulas for Standard Errors that Cluster by Both Firm and Time.” Journal of Financial Economics, 99 (2011), 110.
Tian, X., and Wang, T. Y.. “Tolerance for Failure and Corporate Innovation.” Review of Financial Studies, 27 (2014), 211255.
Wang, T. Y.; Winton, A.; and Yu, X.. “Corporate Fraud and Business Conditions: Evidence from IPOs.” Journal of Finance, 65 (2010), 22552292.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
Type Description Title
Supplementary materials

Bhattacharya supplementary material
Bhattacharya supplementary material 1

 PDF (720 KB)
720 KB


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed