ing them to restart. Another indicator is ILLIQUIDITY. It refers to closures due to liquidity
problems. Concerning ILLIQUIDITY the similar applies as with regard to the before dis-
cussed measure NOTWORTH: there is no clear expectation about how it affects restart
likelihood. ILLIQUIDITY may be an equivalent indicator for failure as DEBTS is, however,
illiquidity can also be a problem of firms which are basically economically sound. One
single big customer with default in payment is sufficient to plunge a firm into liquidity
distress.
The variables WAGEEMPL and RETIRE refer to closures which occur because entrepre-
neurs either changed into wage employment or went into retirement. Due to such a shift
of the income source negative effects on the restart likelihood are expected. Finally, the
variable PRIVATE refers to business closures because of private reasons, OTHERREAS
refers to other not further specified reasons, and QUARREL refers to quarrels within the
entrepreneur team. Since the latter closure reason is only possible if there is an entre-
preneur team, effects referring to it have to be interpreted jointly with the indicator ac-
counting for team governance. For all three variables PRIVATE, OTHERREAS, and QUAR-
REL no expectations about the effects are derived.
Results
Table 2 shows the mean values of the introduced independent variables. Almost a quar-
ter of the surveyed closures can be considered as business failures since in 24 percent of
the closures excessive debts play a major role. The target thresholds of performance
were missed in 38 percent of the closures. Liquidity problems contribute in 45 percent of
the cases to the closure decision. About 6 percent of the closures exited because entre-
preneurs changed into wage employment, while a change into retirement are relevant for
4 percent of the closures. Private or other reasons were important in 13 and 21 percent
of the closure cases. Finally, quarrel within the entrepreneur team plays a role in about
14 percent of the closures.
”Entrepreneurs risk their financial well-being, career opportunities, family relations, and
physical well-being” (Liles, 1974). This recognition is fairly true as the 61 percent share
of entrepreneurs who incurred financial losses due to their business closure suggests. At
a first glance, this finding does not agree with Dennis and Fernald (2001) who note that
“the chances of financial success in terms of change in personal financial condition are
substantially greater than the chances of loss“. Stating so they refer to their findings
based on exits implying both exits due to real closures and due to sale of shareholdings.
Indeed, a exit of the latter type is associated with a freeing of capital (Stam et al., 2006)
and probably with capital gains. However, referring solely on business closures the data
of Dennis and Fernald (2001) also show that slightly more than half of all entrepreneurs
suffer losses due to business closure which is comparable with the finding herein. Banks
and public institutions suffered losses in 22 percent of the closures, while in 31 percent of
the closures other stakeholder like suppliers must incur losses.