Entrepreneurship and information on past failures: A natural experiment

Christophe Cahn, Mattia Girotti and Augustin Landier

Journal of Financial Economics, 2021, vol. 141, issue 1, 102-121

Abstract: We analyze how public information on past entrepreneurial failure affects entrepreneurs’ ability to borrow and start new ventures. We exploit a policy shock from 2013 in France, which eliminated a widely used means of public reporting to banks of the identity of entrepreneurs involved in past corporate liquidations. We find that the elimination of this flag increases failed entrepreneurs’ probability of starting a new business by at least 19%. Restarters create companies that have a higher probability of default. The effect of the reform is significantly more pronounced for younger entrepreneurs, in line with banks rationally using information to update beliefs on entrepreneurs’ ability.

Keywords: Entrepreneurship; Firm Creation; Access to Credit; Bankruptcy; Banks (search for similar items in EconPapers)
JEL-codes: G21 G33 L26 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Entrepreneurship and Information on Past Failures: A Natural Experiment (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:141:y:2021:i:1:p:102-121

DOI: 10.1016/j.jfineco.2020.06.021

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