Firm closure, financial losses and the consequences for
an entrepreneurial restart
Georg Metzger
ZEW Centre for European Economic Research, Mannheim
P.O.Box 103443
68034 Mannheim, Germany
Phone: +49 621 1235-185, e-mail: [email protected]
www.zew.de
Abstract
Many entrepreneurs who close a business are actually willing to venture anew. However,
to realize a restart is not only a matter of willingness on the part of the entrepreneur but
also of its feasibility. Regarding the feasibility of a restart, the aspect of capital acquisi-
tion might be particularly precarious for renascent entrepreneurs since business closures
are likely to come up with financial losses. Financial losses arising from business closure
can befall various stakeholders: shareholders, banks and public institutions, or suppliers
and other stakeholders. The major finding of this analysis is that financial losses due to
business closure strongly influence the likelihood of entrepreneurial restart - yet only
when losses are incurred by banks. Losses which are incurred privately by the entrepre-
neurs or by other stakeholders do not influence the restart likelihood. Entrepreneurs who
would seek to continue their entrepreneurial career after a business closure would be well
advised to avoid causing losses at banks.
Keywords
Firm closure; financial loss; restart.
JEL-Classifications
G33; L26; M13.