We apply prospect theory to explain how personal and corporate bankruptcy laws affect risk perceptions of entrepreneurs at time of entry and therefore their growth ambitions. Previous theories have ...reached ambiguous conclusions as to whether countries with more debtor-friendly bankruptcy laws (i.e. laws that are more forgiving towards debtors in bankruptcy proceedings) are likely to have more entrepreneurs, or whether, creditor-friendly regimes have positive effects on new ventures via enhanced incentives for the supply of credit to entrepreneurs. Responding to this ambiguity, we apply prospect theory to propose that entrepreneurs do not attach the same significance to different elements of bankruptcy codes—and to explain which aspects of debtor-friendly bankruptcy laws matter more to entrepreneurs. Based on this, we derive and confirm hypotheses about the impact of aspects of bankruptcy codes on entrepreneurial activity using the Global Entrepreneurship Monitor combined with data on both personal and corporate bankruptcy regulations for 15 developed OECD countries. We use multilevel random coefficient logistic regressions to take account of the hierarchical nature of the data (country and individual levels). Because entrepreneurs and creditors are sensitive to different elements of the codes, there is scope for optimisation of the legal design of bankruptcy law to achieve both an adequate supply of credit and to encourage high-ambition entrepreneurship.
Although Chapter 11 has served as a model for bankruptcy reform around the world, the conventional wisdom has been that it is characterized by a relatively low success rate and endless delay. The ...data from large samples of Chapter 11 cases filed in 1994 and 2002 demonstrate that this characterization is wrong. Nearly all troubled companies choose Chapter 11 over Chapter 7 liquidation, which means that the system serves a critical screening function to eliminate hopeless cases relatively quickly. Almost half the unsuccessful cases were jettisoned within six months and almost eighty percent were gone within a year. The cases that survive the early screening result in confirmed plans of reorganization around seventy percent of the time. The mistaken conventional view has not only skewed the academic debate, but also prompted changes to the statute in 2005 regarding small business reorganizations, changes that may have produced little benefit in reducing delay at the price of blocking many small business reorganizations of a sort that were succeeding prior to the amendments.
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BFBNIB, CEKLJ, DOBA, IZUM, KILJ, NMLJ, NUK, PILJ, PNG, PRFLJ, SAZU, SIK, UILJ, UKNU, UL, UM, UPUK
43.
Event Roundup
American Bankruptcy Institute journal,
05/2017, Volume:
36, Issue:
5
Journal Article
...back by popular demand was ABI's "Shark Tank" session, which featured bankruptcy experts pitching proposed modifications to recent U.S. Supreme Court/circuit-level prof ro^rr Rasmussen (University ...decisions and other topi- of Southern California Gould School cal bankruptcy issues to a of Law; Los Angeles) delivered the panel of judicial "sharks." luncheon...
We examine chief executive officer (CEO) career and compensation changes for large firms filing for Chapter 11. One-third of the incumbent CEOs maintain executive employment, and these CEOs ...experience a median compensation change of zero. However, incumbent CEOs leaving the executive labor market suffer a compensation loss with a median present value until age 65 of $7 million (five times pre-departure compensation). The likelihood of leaving decreases with profitability and CEO share ownership. Furthermore, creditor control rights during bankruptcy (through debtor-in-possession financing and large trade credits) are associated with CEO career change. Despite large equity losses (median $11 million for incumbents who stay until filing), the median incumbent does not reduce his stock ownership as the firm approaches bankruptcy.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
This paper examines the implicit health insurance that households receive from the ability to declare bankruptcy. Exploiting multiple sources of variation in asset exemption law, I show that ...uninsured households with a greater financial cost of bankruptcy make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth at risk are more likely to hold health insurance. The implicit insurance from bankruptcy distorts the insurance coverage decision. Using a microsimulation model, I calculate that the optimal Pigovian penalties are three-quarters as large as the average penalties under the Affordable Care Act.
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Using a sample of small firms that defaulted on their bank debt in France, Germany, and the United Kingdom, we find that large differences in creditors' rights across countries lead banks to adjust ...their lending and reorganization practices to mitigate costly aspects of bankruptcy law. In particular, French banks respond to a creditor-unfriendly code by requiring more collateral than lenders elsewhere, and by relying on collateral forms that minimize the statutory dilution of their claims in bankruptcy. Despite such adjustments, bank recovery rates in default remain sharply different across the three countries, reflecting very different levels of creditor protection.
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BFBNIB, FZAB, GIS, IJS, INZLJ, KILJ, NLZOH, NMLJ, NUK, OILJ, PNG, SAZU, SBCE, SBMB, UL, UM, UPUK, ZRSKP
47.
Friends with bankruptcy protection benefits Kleiner, Kristoph; Stoffman, Noah; Yonker, Scott E.
Journal of financial economics,
02/2021, Volume:
139, Issue:
2
Journal Article
Peer reviewed
We show information spillovers limit the effectiveness of targeted debt relief programs. We study individuals who learn about the likelihood of debt relief from the recent experiences of workplace ...peers filing for bankruptcy protection. Peers granted bankruptcy can discharge debts, while peers facing dismissal lose all protections. Exploiting the random assignment of judges to bankruptcy cases, we determine that individuals with a “dismissed peer” are significantly less likely to file for bankruptcy or enter foreclosure. We highlight a novel channel relating social networks to household finances and identify additional costs of granting individual debt relief imposed on lenders.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
Stigma attached to bankruptcy - historical background - objectives of Australian bankruptcy law to reduce stigma - recent efforts in the UK to address bankruptcy stigma through legislation - factors ...undermining this effort.
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Literature review on stigma and relevance for status of being or having been bankrupt - examples of labelling as bankrupt facilitates stigmatisation when seeking employment - why the reinforcement of ...bankruptcy stigma matters - suggestions to promote fresh start objective of the Australian bankruptcy system - rehabilitative effect.
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50.
ABC Elects New Officers for 2024 Quackenboss, Amy A
American Bankruptcy Institute journal,
01/2024, Volume:
43, Issue:
1
Journal Article
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