Abstract:
We analyze how information on past entrepreneurial failure affects an entrepreneurs’ ability to borrow. We exploit a policy shock from 2013 in France, which eliminated the direct reporting to banks of managers involved in non-fraudulent corporate liquidations by Banque de France. We find that the deflagging makes failed entrepreneurs significantly more likely to restart a business or to borrow from a surviving business, despite the fact that bankers could find the failure information from other public sources. The effect is stronger for industries where entrepreneurial talent matters more for performance. Restarters create companies that have a higher probability of default.