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The Financial Lobster Bias

Author

Listed:
  • Óscar De los Reyes Marín

    (Department of Economics and Business, Faculty of Social and Legal Sciences, Universidad Rey Juan Carlos, Campus de Vicálvaro, 28032 Madrid, Spain)

  • Iria Paz Gil

    (Department of Economics and Business, Faculty of Social and Legal Sciences, Universidad Rey Juan Carlos, Campus de Vicálvaro, 28032 Madrid, Spain)

  • Jose Torres-Pruñonosa

    (Faculty of Economics and Business, International University of La Rioja (UNIR), 26006 Logroño, Spain)

  • Raúl Gómez-Martínez

    (Department of Economics and Business, Faculty of Social and Legal Sciences, Universidad Rey Juan Carlos, Campus de Vicálvaro, 28032 Madrid, Spain)

Abstract

The Financial Lobster Bias describes how SMEs, driven by distorted liquidity perceptions, engage in aggressive expansion until financial breakdown occurs. Using data from 10,412 Spanish SMEs (2000–2024), this study shows that liquidity misperception—measured through two versions of the Liquidity Misperception Index (PEL), one based on financial structure and another on payment–collection timing (PMP–PMC)—is a significant driver of expansion–collapse cycles. The financial PEL displays a strong temporal trend (R 2 = 0.736), while the PMP–PMC-based PEL also increases over time (R 2 = 0.411), evidencing a persistent widening between perceived and real liquidity. The Illusory Confidence in Liquidity Index (ICEL) reveals that confidence peaks coincide with periods of systemic fragility. The Unsustainable Expansion Index (IEI) identifies pre-crisis overexpansion (IEI = 2.34 in 2005; 2.87 in 2006; 1.72 in 2007), preceding the 2008 failure surge. Together, these indicators provide early-warning mechanisms that uncover hidden fragility and help anticipate liquidity-driven collapse.

Suggested Citation

  • Óscar De los Reyes Marín & Iria Paz Gil & Jose Torres-Pruñonosa & Raúl Gómez-Martínez, 2026. "The Financial Lobster Bias," IJFS, MDPI, vol. 14(1), pages 1-19, January.
    • Handle: RePEc:gam:jijfss:v:14:y:2026:i:1:p:17-:d:1834663
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