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Personal Bankruptcy Law and New Business Formation

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  • Bill Francis
  • Iftekhar Hasan
  • Haizhi Wang

Abstract

Using a panel of all 50 U.S. states and the District of Columbia from 1990 to 1999, we report a nonlinear relation between state bankruptcy exemptions and new business formation. The rate of new business formation first increases as exemptions increase, but it then decreases. This result reflects the fact that bankruptcy exemptions tend to affect both demand for and supply of external financing to potential entrepreneurs.

Suggested Citation

  • Bill Francis & Iftekhar Hasan & Haizhi Wang, 2009. "Personal Bankruptcy Law and New Business Formation," The Financial Review, Eastern Finance Association, vol. 44(4), pages 647-663, November.
    • Handle: RePEc:bla:finrev:v:44:y:2009:i:4:p:647-663
    DOI: 10.1111/j.1540-6288.2009.00234.x
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    1. repec:bof:bofitp:urn:nbn:fi:bof-201504131154 is not listed on IDEAS
    2. repec:zbw:bofitp:urn:nbn:fi:bof-201504131154 is not listed on IDEAS
    3. repec:zbw:bofitp:2015_011 is not listed on IDEAS
    4. Chong Kyoon Lee & Johan Wiklund & Alejandro Amezcua & Tae Jun Bae & Almantas Palubinskas, 2022. "Business failure and institutions in entrepreneurship: a systematic review and research agenda," Small Business Economics, Springer, vol. 58(4), pages 1997-2023, April.
    5. Iftekhar Hasan & Nada Kobeissi & Haizhi Wang & Mingming Zhou, 2015. "Banking Structure, Marketization, and Small Business Development: Regional Evidence From China," Pacific Economic Review, Wiley Blackwell, vol. 20(3), pages 487-510, August.
    6. Bose, Udichibarna & Filomeni, Stefano & Mallick, Sushanta, 2021. "Does bankruptcy law improve the fate of distressed firms? The role of credit channels," Journal of Corporate Finance, Elsevier, vol. 68(C).

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