The effect of latent hazards on firm exit in manufacturing industries

This paper provides a theoretical and empirical examination of the impact of latent hazards on manufacturing firms. I discuss the effects of corporate structure and changes in legal regime on firm exit and derive several testable propositions. The empirical analysis tests whether a firm's expected liability from latent hazards affects the length of time the firm remains in business. I find that firms in more hazardous industries have shorter life spans. This research is the first extensive empirical study on die exit decisions of firms in hazardous industries. (C) 1998 by Elsevier Science Inc.