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The effect of personal financing disruptions on entrepreneurship

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  • Hanspal, Tobin

Abstract

I show that disruptions to personal sources of financing, aside from commercial lending supply shocks, impair the survival and growth of small businesses. Entrepreneurs holding deposit accounts at retail banking institutions that defaulted following the financial crisis reduce personal borrowing and are consequently more likely to exit their firm. Exposure to the corresponding investment losses from delisted publicly traded bank stocks strongly reduces the rate of firm survival, particularly for early-stage ventures. At the intensive margin, owners who remain in business reduce employees after personal wealth losses. My results suggest that personal finance is an important component of firm financing.

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  • Hanspal, Tobin, 2016. "The effect of personal financing disruptions on entrepreneurship," SAFE Working Paper Series 161, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:161
    DOI: 10.2139/ssrn.2887264
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    2. Ring, Marius, 2019. "Entrepreneurial Wealth and Employment: Tracing Out the Effects of a Stock Market Crash," MPRA Paper 107020, University Library of Munich, Germany, revised 06 Apr 2021.

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    More about this item

    Keywords

    Entrepreneurship; Small business; Personal finance; Financial crisis; Bank defaults;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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