The effect of physical collateral and personal guarantees on business startups
Yuji Honjo,
Arito Ono and
Daisuke Tsuruta
Journal of Economics and Business, 2024, vol. 130, issue C, No S0148619524000146
Abstract:
Using microdata for Japan for 2007 and 2012, we examine whether and how financial constraints discourage individuals from starting a business. As proxies for financial constraints, we use prefectural variations in the share of firms relying on physical collateral and personal guarantees. We find that individuals are less likely to become nascent entrepreneurs if they live in a prefecture with a higher share of firms relying on personal guarantees. The negative effect of personal guarantees on becoming a nascent entrepreneur is insignificant when using a subsample for 2012, suggesting that administrative and legislative changes since the 2000s have made personal guarantees less costly for potential entrepreneurs over time. In contrast, we do not find a negative link between physical collateral and business startups. Our findings suggest that the low level of entrepreneurship in Japan is not due to financial constraints. If anything, it is due to a lack of risk-taking by potential entrepreneurs rather than a lack of collateralizable assets.
Keywords: Physical collateral; Personal guarantees; Entrepreneur (search for similar items in EconPapers)
JEL-codes: G21 L26 M13 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0148619524000146
Full text for ScienceDirect subscribers only
Related works:
Working Paper: The Effect of Physical Collateral and Personal Guarantees on Business Start-ups (2019) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:130:y:2024:i:c:s0148619524000146
DOI: 10.1016/j.jeconbus.2024.106172
Access Statistics for this article
Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter
More articles in Journal of Economics and Business from Elsevier
Bibliographic data for series maintained by Catherine Liu ().