PT - JOURNAL ARTICLE AU - Erik Wetter AU - Karl Wennberg TI - Improving Business Failure Prediction for New Firms: <em>Benchmarking Financial Models with Human and Social Capital</em> AID - 10.3905/JPE.2009.12.2.030 DP - 2009 Feb 28 TA - The Journal of Private Equity PG - 30--37 VI - 12 IP - 2 4099 - https://pm-research.com/content/12/2/30.short 4100 - https://pm-research.com/content/12/2/30.full AB - Business failure prediction is a prominent issue in research and practice. However, the relation between financial performance and firm default in new firms is more complex than previously assumed and both finance researchers and practitioners can benefit from the existing research on entrepreneurship and new firm performance. Developing measures for human and social capital grounded in previous research, we find that either of these variables have considerably higher predictive power than the standard financial model in predicting which firms stay in business and which firms that default. With regards to new firms in high-technology and service industries, the traditional financial model does not beat the predictive accuracy of simply flipping a coin.TOPICS: Private equity, analysis of individual factors/risk premia, statistical methods, developed