Entrepreneurship and Information on Past Failures: A Natural Experiment
62 Pages Posted: 18 Jul 2017 Last revised: 26 May 2020
Date Written: May 25, 2020
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, Access to credit, Bankruptcy
JEL Classification: G33, L26
Suggested Citation: Suggested Citation