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Indebtedness for young companies: effects on survival

Author

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  • Léopold Djoutsa Wamba
  • Lubica Hikkerova
  • Jean-Michel Sahut
  • Eric Braune

Abstract

Based on data from 7,350 Cameroonian companies created between 1990 and 2008, we study the link between the characteristics of indebtedness for young companies during their creation and survival period of up to three years, from three to five years, and beyond five years. We complement our quantitative analysis with semi-directive interviews of Cameroonian entrepreneurs to deepen our study. Our results are manifold. We show that access to bank loans during the creation phase, as well as the volume of loans or, to some extent, the debt ratio improve the probability of survival during the early years, but this effect fades away rapidly. The interviews shed light on the motivations of entrepreneurs, particularly of those with very small businesses. Finally, our work reveals the antecedent role of their social capital that facilitates their access to bank loans, and, therefore, the probability of company survival.

Suggested Citation

  • Léopold Djoutsa Wamba & Lubica Hikkerova & Jean-Michel Sahut & Eric Braune, 2017. "Indebtedness for young companies: effects on survival," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 29(1-2), pages 174-196, January.
    • Handle: RePEc:taf:entreg:v:29:y:2017:i:1-2:p:174-196
    DOI: 10.1080/08985626.2016.1255435
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    Cited by:

    1. Angelo Castaldo & Rosanna Pittiglio & Filippo Reganati & Domenico Sarno, 2023. "Access to bank financing and start‐up resilience: A survival analysis across business sectors in a time of crisis," Manchester School, University of Manchester, vol. 91(3), pages 141-170, June.
    2. Amarjit Gill & Craig Wilson, 2021. "Bank connections and small business performance: Evidence from Canadian survey data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5110-5134, October.

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