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Do financial and real factors matter for small business recovery following default? Evidence from Japan

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  • Tsuruta, Daisuke

Abstract

We investigate the roles of financial and real factors in the post-default survival and performance of small businesses in Japan. The results show that real factors (such as asset growth, profitability, sales growth, younger managers, and the presence of a successor) are positively associated with firm survival. Although additional bank credit is also associated with survival, reductions in interest payments are not, and both forms of financial support are weakly or negatively related to ex post firm performance. Using principal component analysis, we distinguish real and financial drivers of firm outcomes and find that firms with stronger real characteristics outperform those relying primarily on financial support. These findings suggest that policies supporting real investment may play an important role in the rehabilitation of small businesses after loan default.

Suggested Citation

  • Tsuruta, Daisuke, 2026. "Do financial and real factors matter for small business recovery following default? Evidence from Japan," Economic Modelling, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:ecmode:v:162:y:2026:i:c:s0264999326002178
    DOI: 10.1016/j.econmod.2026.107688
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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