Entrepreneurship and Information on Past Failures: A Natural Experiment

49 Pages Posted: 18 Jul 2017 Last revised: 23 Dec 2017

Christophe Cahn

Banque de France - Direction des Entreprises

Mattia Girotti

Banque de France

Augustin Landier

Toulouse School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 22, 2017

Abstract

We analyze how public information on past entrepreneurial failure affects an entrepreneur's ability to borrow. We exploit a policy shock from 2013 in France, which eliminated a highly salient public reporting to banks of managers involved in non-fraudulent corporate liquidations. We find that the elimination of this flagging system makes failed entrepreneurs significantly more likely to restart a business or to borrow from a surviving business, despite the fact that bankers can find the failure information from other public sources for a small cost. The effect is more pronounced for industries where failure is a stronger signal about entrepreneurial ability. Restarters create companies that have a higher probability of default.

Keywords: Entrepreneurship, Access to credit, Bankruptcy

JEL Classification: G33, L26

Suggested Citation

Cahn, Christophe and Girotti, Mattia and Landier, Augustin, Entrepreneurship and Information on Past Failures: A Natural Experiment (December 22, 2017). Available at SSRN: https://ssrn.com/abstract=3000829 or http://dx.doi.org/10.2139/ssrn.3000829

Christophe Cahn

Banque de France - Direction des Entreprises ( email )

39 rue Croix des Petits Champs
Paris Cedex 01 75049
France

Mattia Girotti (Contact Author)

Banque de France ( email )

Paris
France

Augustin Landier

Toulouse School of Economics ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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