Start-Up Financing, Owner Characteristics, and Survival

Posted: 7 Mar 2003

See all articles by Thomas B. Astebro

Thomas B. Astebro

HEC Paris - Economics and Decision Sciences

Irwin Bernhardt

University of Waterloo - Department of Management Sciences

Abstract

We investigated the relation between the survival of new small businesses and their having a bank loan. This was done in the context of a model that included other loan sources, human capital variables, as well as company and industry descriptors. We found, that, over the sample, there is a negative correlation between having a bank loan and business survival. There was, on the other hand, a positive correlation between having a non-bank loan and survival. However, having a bank loan was a ceteris paribus positive predictor of the survival of start-up companies. Our findings enabled some inferences about the process of selection of loan sources by start-up business owners, and about the process of granting loans by banks. There was evidence of self-selection towards non-bank sources of funds by owners with high levels of observable human capital and wealth and weak evidence of adverse selection against banks.

Keywords: Bank loans, financing, start-up, small business, survival, human capital, adverse selection, forecast

JEL Classification: G21, M20

Suggested Citation

Astebro, Thomas B. and Bernhardt, Irwin, Start-Up Financing, Owner Characteristics, and Survival. Available at SSRN: https://ssrn.com/abstract=383243

Thomas B. Astebro (Contact Author)

HEC Paris - Economics and Decision Sciences ( email )

Jouy-en-Josas Cedex, 78351
France

HOME PAGE: http://www.hec.edu/Faculty-Research/Faculty-Directory/ASTEBRO-Thomas

Irwin Bernhardt

University of Waterloo - Department of Management Sciences ( email )

Waterloo, Ontario N2L 3G1
Canada

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