50 Pages Posted: 18 Jul 2017
Date Written: June 29, 2017
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 stronger for industries where entrepreneurial talent matters more for performance. Restarters create companies that have a higher probability of default.
Keywords: Entrepreneurship, Access to credit, Bankruptcy
JEL Classification: G33, L26
Suggested Citation: Suggested Citation
Cahn, Christophe and Girotti, Mattia and Landier, Augustin, Entrepreneurship and Information on Past Failures: A Natural Experiment (June 29, 2017). Available at SSRN: https://ssrn.com/abstract=3000829