The Shadow of Death: Pre-exit Performance of Firms in Japan

This paper examines the pre-exit productivity performance and asks how productivity affects future survival, using firm-level data in Japan for 1995-2002. We found that firms did not face "sudden death" but there was a "shadow of death." Future exiting firms had lower performance four years before their exit. Besides, within a hair 's breadth of death, the unobserved heterogeneity of firm such as management effort played an important role in the firm survival.