Firm Size, Compensation and Firm Deaths in SMEs: A Evidence from America

Daniel Quacoe, Xuezhou Wen, Dinah Quacoe, Ann Dodor

Abstract


This paper mainly investigates how SMEs compensation affects their collapse and render unsustainable. We utilize annual time series data provided by America’s Small Business Administration from 1988 to 2014. We decompose SMEs into three size categories (micro, small and medium) and analyze the impact of compensation on the collapse of each of these sub-divisions to capture the extent this might help inform policy. Our ARDL Bounds Test analysis shows that compensation and firm deaths or sustainability have long-run relationship. Through VECM Granger causality analysis, we find a unidirectional causality running from compensation to firm death indicating that the compensation system to workers of SMEs significantly contributes to their sustainability.


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