Bankruptcy and Entrepreneurship; A Case Study of Finland

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Volume Title
School of Business | Master's thesis
Date
2019
Major/Subject
Mcode
Degree programme
Economics
Language
en
Pages
43 + 8
Series
Abstract
Personal and corporate bankruptcy laws, and the regulation of insolvency in gen- eral, can impact the risk perception of entrepreneurs, hence impacting their growth ambitions as well as their very decision whether to become entrepreneurs. The rela- tionship between bankruptcy legislation and entrepreneurship, therefore, may be of interest to policymakers and entrepreneurs alike. In this thesis, after a brief review of some literature on the subject of bankruptcy vis-`a-vis entrepreneurship, I report my own empirical analysis pertaining to the effect of a bankruptcy reform in Finland on the country’s level of entrepreneurship. I hypothesise that the reform, enacted in 2004, had a slightly positive impact on entrepreneurship. My identification strategy is synthetic control method (SCM) and my source of data is Global Entrepreneur- ship Monitor. I have 11 countries in my SCM donor pool and also 14 indicators as my predictors of entrepreneurship. For implementing the SCM, I make use of an R package called ”Synth” which provides a range of results including informative graphical output. After running the code, I find a small increase in entrepreneurship in Finland after the reform. However, after running placebo tests, this effect turns out to be spurious. In conclusion, according to my analysis, the 2004 bankruptcy reform did not have a significant effect on entrepreneurial activity in Finland.
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Thesis advisor
Toivanen, Otto
Keywords
entrepreneurship, bankruptcy, risk, Finland
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