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Title:Business closure and financial loss: Who foots the bill? Evidence from German small business closures PDF Logo
Authors:Metzger, Georg
Issue Date:2010
Series/Report no.:ZEW Discussion Papers 10-026
Abstract:This paper explores how different reasons for business closure impact the probability that financial loss will be suffered by creditors. Using German small business data, the study finds that business closure due to financial problems is strongly correlated with a likelihood of financial loss. By contrast, closures that take place based on expectations about a business' future development or because the owner takes a different earning opportunity are less likely to entail losses for creditors. The findings suggest that creditors are better off when entrepreneurs have a clear picture of their own abilities and shortcomings, and don't suffer from all-too-frequent over-optimism. Consequently, creditors stand to gain from helping clients to assess financial prospects.
Subjects:Bankruptcy
business closure
financial loss
JEL:G33
L26
M13
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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