The Effect of Personal Financing Disruptions on Entrepreneurship

62 Pages Posted: 21 Dec 2016 Last revised: 6 Nov 2018

See all articles by Tobin Hanspal

Tobin Hanspal

Research Center SAFE, Goethe University Frankfurt

Date Written: October 14, 2018

Abstract

This paper studies how 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 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

JEL Classification: L26, D14, G01, G11, G21, G33

Suggested Citation

Hanspal, Tobin, The Effect of Personal Financing Disruptions on Entrepreneurship (October 14, 2018). SAFE Working Paper No. 161. Available at SSRN: https://ssrn.com/abstract=2887264 or http://dx.doi.org/10.2139/ssrn.2887264

Tobin Hanspal (Contact Author)

Research Center SAFE, Goethe University Frankfurt ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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