Firm Closure, Financial Losses and the Consequences for an Entrepreneurial Restart

Table 1: Definition of variables

Variable	Definition	Hypothesis tested	Expected sign of effect
Main covariates I:	Closure reasons ^a
DEBTS	= 1 if closure due to excessive debts	H1	-
NOTWORTH	= 1 if closure because business didn’t meet entrepreneur’s target		?
	performance threshold
ILLIQUIDITY	= 1 if closure due to liquidity problems	H1	-
WAGEEMPL	= 1 if closure because entrepreneur transitioned to workforce		-
RETIRE	= 1 if closure because entrepreneur went into retirement		-
PRIVATE	= 1 if closure because of private reasons		?
OTHERREAS	= 1 if closure because of other reasons		?
QUARREL	= 1 if closure due to differences within the entrepreneur team		?
	(the effect of this variable has to be interpreted jointly with
	the TEAM indicator)
Main covariates II	: Bearer of financial losses ^a
Sharehol	= 1 if entrepreneurs incurred financial losses due to the business	H2	-
	closure
BANKS	= 1 if banks or public institutions incurred financial losses due to	H3	-
	the business closure
OTHERSTAKE	= 1 if other stakeholders (like suppliers) incurred financial losses		?
	due to the business closure
Control variables
capital	= Amount of start-up capital utilized in the closed firm (in ‘000 €)		?
CAPITALM	= 1 if the amount of capital is not available
TEAM	= 1 if firm was ruled by an entrepreneur team		+
TEAMM	= 1 if the TEAM indicator is missing
LIMITED	= 1 if the firm’s legal status was liability limiting		0
SIZE	= # of employees at firm closure		+
SIZEM	= 1 if firm size is not available
AGE	= Age of the closed firm (in years)		?
AGEM	= 1 if firm age is not available
EAST	= 1 if the firm was located in East Germany		0
HTIND	= 1 if the firms was affiliated in a high-tech industry sector		0
OTHERIND	= 1 if the firms was affiliated in a non-high-tech industry sector		+
TECHSERV	= 1 if the firms was affiliated in a high-tech service sector		+
OTHERSERV	= 1 if the firms was affiliated in a non-high-tech service sector		+
CONSTRUCT	= 1 if the firms was affiliated in construction		+
TRADE________	= 1 if the firms was affiliated in trade services		+
^a Multiple statements were possible.
Note: The expected signs of the control variables’ effects are suggested by the findings of Metzger (2008).

There are different closure reasons that could be developed from the interviewees an-
swers, which led to eight indicators. The indicator DEBTS refers to closures due to exces-
sive debts. It is a closure reason that suggests business failure and which is thus an ap-
propriate indicator to test hypothesis H1 owing to which negative effects are expected.
NOTWORTH is a further closure reason variable. It refers to closures that occur because
they do not meet the entrepreneurs’ target threshold of performance. However, no ex-
pectation about the effect of this measure is derived. At the one hand, entrepreneurs
who close a business because they recognize that a going concern is not worth it, might
regard themselves as being failed preventing them from restart. At the other hand, they
may hold the opinion that this experience improved their entrepreneurial talent confirm-

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