Firms, age and exponents: Understanding the distribution Kar Brajaballav1,*, Associate Professor, Jena Manoj Kumar1,*, Associate Professor 1KIIT University, Bhubaneswar, Odisha, India (* Corresponding author) email id: *brajkar@gmail.com,
*manoj.iitbombay@gmail.com
Abstract The age of a firm indicates its ability to survive. Age acts as a proxy to different operational parameters related to firm performance. At an aggregate level, firm-age distribution indicates the structure and health of the economy or industry and such findings for different states did not pre-exist. Age of firms in India has not been analysed before and there is substantial evidence to analyse firm-age distribution as one of the important parameters for economy. This research takes the registration date of active firms from Ministry of Corporate Affairs (MCA), calculates the companies’ age as on 2015 and derives a curve-fit to the data to identify the pattern. Top 10 states in order of their contribution to gross domestic product of India were chosen and ages of 831,365 active firms were computed, the percentage distribution of ages was calculated for each state and the pattern was found. It is found that exponential curve best describes the firm-age distribution. The cumulative value of percentage distribution indicates survival chance and it also seems to preserve the historicity of the economy including any structural change. The coefficient of the equation points to the formation rate and the exponential coefficient indicates the age-specific mortality. However, the MCA data are available for active companies only; thus, it does not have the actual mortality over the period. This research brings out the age characteristics of firms and can help link firm-age to other performance parameters at a macro-level and serve as a proxy to other parameters. The age distribution will help in representative sample selection based on age for investigations related to industry characteristics. The study suggests that the firm-age distribution could act as a proxy to ascertain mortality of firms in India. Top Keywords Firm age, Exit hazard, Pyramid, Survival function, Age distribution, Business growth, India. Top |