The Effect of Personal Financing Disruptions on Entrepreneurship
62 Pages Posted: 21 Dec 2016 Last revised: 6 Nov 2018
Date Written: October 14, 2018
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: Suggested Citation