How Well Do Owner–Managers Forecast Potential Future Bankruptcy? Assessing Fear of Failure Using Employment Insurance for SMEs

• DOI: http://doi.org/10.1002/cjas.1480
• Date: 01 March 2019
• Author: Sophie Pommet,Jean‐François Sattin
• Published date: 01 March 2019

How Well Do Owner–Managers Forecast Potential

Future Bankruptcy? Assessing Fear of Failure

Using Employment Insurance for SMEs

Sophie Pommet

Université Côte d’Azur, CNRS

Jean-François Sattin*

Université Paris 1 Panthéon-Sorbonne, PRISM

Abstract

The literature so far has not addressed how owner–managers

deal with the risks associated with potential future bank-

ruptcy. We propose here a new way to assess the fear of

failure experienced by SME owner–managers and examine

whether these risks are being anticipated accurately, by

focusing on the benef‌its to be gained from French unemploy-

ment insurance. We compare the valuation of the benef‌its of

the unemployment insurance scheme for the two populations

of insured and uninsured owner–managers after matching.

We rely on matching procedures and a f‌ive-step protocol.

Our results show that owner–managers’awareness of

possible future problems increases when becoming insured

and after experiencing a failure, suggesting some business

failure myopia in this population. Copyright © 2018 ASAC.

Published by John Wiley & Sons, Ltd.

Keywords: fear of failure, employment insurance, bank-

ruptcy, entrepreneurship, SME

Résumé

La littérature n’a pour le moment apporté qu’une attention

très marginale à la question de savoir comment les

dirigeants d’entreprise gèrent les risques associés à une

faillite potentielle. Nous proposons dans cet article une

nouvelle méthode af‌ind’évaluer la peur de la faillite

ressentie par les dirigeants de PME, en nous focalisant sur

les bénéf‌ices tirés d’un système d’assurance-chômage

français. Plus précisément, nous comparons la satisfaction

ressentie par les dirigeants de PME assurés et non assurés

vis-à-vis de l’assurance-chômage en recourant à un

processus d’appariement statistique en 5 étapes. Nous

examinons ensuite si ces risques semblent correctement

anticipés. Nos résultats montrent que la sensibilisation des

dirigeants de PME aux problèmes potentiels associés à la

faillite augmente pour les dirigeants assurés et pour ceux

qui ont connu une faillite après appariement, suggérant

ainsi une certaine myopie vis-à-vis des conséquences de la

faillite au sein de cette population. Copyright © 2018 ASAC.

Published by John Wiley & Sons, Ltd.

Mots-clés: peur de la faillite, assurance-chômage, faillite,

entrepreneuriat, PME

Introduction

New f‌irm creation in OECD countries has increased

steadily in recent decades, as has the number of f‌irm failures

(OECD, 2014). If f‌irm bankruptcy is a normal attribute of

economic activity (Schumpeter, 1942; Von Mises, 1949), it

might also be driving the occurrence of dramatic situations

involving signif‌icant losses, f‌inancial distress, grief, and a

sense of personal failure among entrepreneurs (Shepherd,

2003) and owner–managers of small and medium sized

enterprises (SME) generally (Shepherd et al., 2009).

Recent work on this topic focuses on the consequence

of fear of failure for the entrepreneurial process, but also

on the characteristics of the trauma resulting from the bank-

ruptcy, the factors that explain its magnitude, and the re-

sponses of entrepreneurs to failure (Cope, 2011; Shepherd,

2003; Ucbasaran et al., 2013; Jenkins et al., 2014; Simmons

et al., 2014) or to the anticipation of failure (Shepherd 2009).

However, the literature so far has not addressed how SME

owner–managers, especially in France, deal with the risks

associated with potential future bankruptcy.

The present paper addresses this gap by exploring how

well SME owner–managers forecast possible distress due

to failure. It focuses on an unemployment insurance (UI)

policy designed specif‌ically for owner–managers. We ana-

lyze how well the benef‌its associated with a UI scheme are

*Please address correspondence to: Jean-François Sattin, Université Paris 1

Panthéon-Sorbonne, PRISM, 17 rue de la Sorbonne, 75005 Paris, France:

jean-francois.sattin@univ-paris1.fr

Canadian Journal of Administrative Sciences

Revue canadienne des sciences de l’administration

36:20–34 (2019)

Published online 14 February 2018 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/CJAS.1480

Can J Adm Sci

36(1), 20–34 (2019)Copyright © 2018 ASAC. Published by John Wiley & Sons, Ltd. 20