The effect of personal financing disruptions on entrepreneurship

Tobin Hanspal

No 161, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: I show that disruptions to personal sources of financing, aside from commercial lending supply shocks, impair the survival and growth of small businesses. Entrepreneurs holding deposit accounts at retail banking institutions that defaulted following the financial crisis reduce personal borrowing and are consequently more likely to exit their firm. Exposure to the corresponding investment losses from delisted publicly traded bank stocks strongly reduces the rate of firm survival, particularly for early-stage ventures. At the intensive margin, owners who remain in business reduce employees after personal wealth losses. My results suggest that personal finance is an important component of firm financing.

Keywords: Entrepreneurship; Small business; Personal finance; Financial crisis; Bank defaults (search for similar items in EconPapers)
JEL-codes: D14 G01 G11 G21 G33 L26 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-ent and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:161

DOI: 10.2139/ssrn.2887264

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