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An Empirical Study on the Failure Factors of Startups Using Non-financial Information  

Nam, Gi Joung (Department of Advanced Industry Fusion, Konkuk University)
Lee, Dong Myung (Department of Advanced Industry Fusion, Konkuk University)
Chen, Lu (Konkuk University)
Publication Information
Asia-Pacific Journal of Business Venturing and Entrepreneurship / v.14, no.1, 2019 , pp. 139-149 More about this Journal
Abstract
The purpose of this study is to contribute to the minimization of the social cost due to the insolvency by improving the success rate of the startups by providing useful information to the founders and the start-up support institutions through analysis of non-financial information affecting the failure of the startups. This study is aimed at entrepreneurs. The entrepreneurs that are defined by the credit guarantee institutions generally refer to entrepreneurs within 5 years of establishment. The data used in the study are sampled from the companies that were supported by the start-up guarantee from January 2014 to December 2013 as the end of December 2017. The total number of sampled firms is 2,826, 2,267 companies (80.2%), and 559 non-performing companies (19.8%). The non-financial information of the entrepreneur was divided into the entrepreneur characteristics information, the entrepreneur characteristics information, the entrepreneur asset information and the entrepreneur 's credit information, and cross-tabulations and logistic regression analysis were conducted. As a result of cross-tabulations, univariate analysis showed that personal credit rating, presence in the industry, presence of residential housing, presence of employees, and presence of financial statements were selected as significant variables. As a result of the logistic regression analysis, three variables such as personal credit rating, occupation in the industry, and presence of residential house were found to be important factors affecting the failure of founding companies. This result shows the importance of entrepreneur 's personal credibility and experience and entrepreneur' s assets in business management. The start-up support institutions should reflect these results in the entrepreneur 's credit evaluation system, and the entrepreneurs need training on the importance of the personal credit and the management plan in the entrepreneurial education. The results of this analysis will contribute to the minimization of the incapacity of startups by providing useful non-financial information to founders and start-up support organizations.
Keywords
Non-financial Information; Startups; Failure factor; Logistic Regression Analysis; Cross-tabulations;
Citations & Related Records
Times Cited By KSCI : 2  (Citation Analysis)
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