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Personal Bankruptcy Law and Entrepreneurship

January 2017

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Similar Working Papers Similarity between working papers are determined by an unsupervised neural network model know as Doc2Vec.

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The 10 most similar working papers to the working paper 'Personal Bankruptcy Law and Entrepreneurship' are listed below in order of similarity.

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  January 2016

  Authors: Nuri Ersahin, Rustom M. Irani, Katherine Waldock

  Working Paper Number:

  CES-16-31

  We examine entrepreneurial activity following the adoption of fraudulent transfer laws in the U.S. These laws strengthen creditor rights by removing the burden of proof from creditors attempting to claw back funds that were transferred out of failing businesses. These laws are particularly important for entrepreneurs whose personal assets are often commingled with those of the venture. Using establishment-level data from the U.S. Census Bureau, we find significant declines in start-up entry, churning among new entrants, and closures of existing ventures after the passage of these laws. Our findings suggest that strengthening creditor rights can, in some circumstances, impede entrepreneurial activity and slow down the process of creative destruction.
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• Working Paper

  
  
  Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship
  

  December 2007

  Authors: William Kerr, Ramana Nanda

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• Working Paper

  
  
  Access to Financing and Racial Pay Gap Inside Firms
  

  July 2023

  Authors: Wenting Ma, Janet Gao, Qiping Xu

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  How does access to financing influence racial pay inequality inside firms? We answer this question using the employer-employee matched data administered by the U.S. Census Bureau and detailed resume data recording workers' career trajectories. Exploiting exogenous shocks to firms' debt capacity, we find that better access to debt financing significantly narrows the earnings gap between minority and white workers. Minority workers experience a persistent increase in earnings and also a rise in the pay rank relative to white workers in the same firm. The effect is more pronounced among mid- and high-skill minority workers, in areas where white workers are in shorter supply, and for firms with ex-ante less diverse boards and greater pre-existing racial inequality. With better access to financing, minority workers are also more likely to be promoted or be reassigned to technology-oriented occupations compared to white workers. Our evidence is consistent with access to financing making firms better utilize minority workers' human capital.
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• Working Paper

  
  
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  September 2014

  Authors: Ron Jarmin, C.J. Krizan, Adela Luque

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  Minority owned businesses are an increasing important component of the U.S. economy, growing at twice the rate of all U.S. businesses between 2002 and 2007. However, a growing literature indicates that minority-owned businesses may have been especially impacted by the Great Recession. As house prices declined, foreclosures fell disproportionately on urban minority neighborhoods and one of the sources of credit for business owners was severely constrained. Using 2002-2011 data from the Longitudinal Business Database linked to the 2002 Survey of Business Owners, this paper adds to the literature by examining the employment growth and survival of minority and women employer businesses during the last decade, including the Great Recession. At first glance, our preliminary findings suggest that black and women-owned businesses underperform white, male-owned businesses, that Asian-owned businesses outperform other groups, and that Hispanic-owned businesses outperform non-Hispanic ones in regards to employment growth. However, when we look only at continuing firms, black-owned businesses outperform white-owned businesses in terms of employment growth. At the same time, we also find that the recession appears to have impacted black-owned and Hispanic-owned businesses more severely than their counterparts, in terms of employment growth as well as survival. This is also the case for continuing black and Hispanic-owned firms.
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  After the Storm: How Emergency Liquidity Helps Small Businesses Following Natural Disasters
  

  April 2024

  Authors: Sabrina T. Howell, Benjamin Collier, Lea Rendell

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  CES-24-20

  Does emergency credit prevent long-term financial distress? We study the causal effects of government-provided recovery loans to small businesses following natural disasters. The rapid financial injection might enable viable firms to survive and grow or might hobble precarious firms with more risk and interest obligations. We show that the loans reduce exit and bankruptcy, increase employment and revenue, unlock private credit, and reduce delinquency. These effects, especially the crowding-in of private credit, appear to reflect resolving uncertainty about repair. We do not find capital reallocation away from neighboring firms and see some evidence of positive spillovers on local entry.
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• Working Paper

  
  
  How Big is Small? The Economic Effects of Access to Small Business Subsidies
  

  June 2024

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  Working Paper Number:

  CES-24-28

  Industry size standards that determine eligibility for small business subsidies have vastly increased over the past decade. We exploit quasi-random variation in the implementation of size standard increases to study the effects on small firms, subsidy allocation, and industry outcomes using Census Bureau microdata. Following size standard increases, revenues decline for an industry's smallest firms, and they are less likely to survive. We link these effects to a reallocation of government procurement contracts from smaller to larger firms. Consequently, industries become more concentrated and growth declines. These findings highlight the broad economic effects of changing eligibility for small business subsidies.
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• Working Paper

  
  
  The Employee Clientele of Corporate Leverage: Evidence from Personal Labor Income Diversification
  

  January 2018

  Authors: Jie (Jack) He, Tao Shu, Huan Yang

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  CES-18-01

  Using employee job-level data, we empirically test the equilibrium matching between a firm's debt usage and its employee job risk aversion ('clientele effect'), as predicted by the existing theories. We measure job risk aversion for a firm's employees using their labor income concentration in the firm, calculated as the fraction of the employees' total personal labor income or total household labor income that is accounted for by their income from this particular firm. Using a sample of about 1,400 U.S. public firms from 1990-2008, we find a robust negative relation between leverage and employee job risk aversion, which is consistent with the clientele effect. Specifically, when a firm's existing employees have higher labor income concentration in it, the firm tends to have lower contemporaneous and future leverage. Moreover, in terms of new hires, firms with lower leverage are more likely to recruit employees with less alternative labor income. Our results continue to hold after we control for firm fixed effects, other employee characteristics such as wages, gender, age, race, and education, and managerial risk attitudes. Further, the matching between a firm's leverage and its workers' labor income concentration in it is more pronounced for firms with higher labor intensity and those in financial distress.
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• Working Paper

  
  
  Who Files for Personal Bankruptcy in the United States?
  

  January 2017

  Authors: Jonathan Fisher

  Working Paper Number:

  CES-17-54

  Who files for bankruptcy in the United States is not well understood. Previous research relied on small samples from national surveys or a small number of states from administrative records. I use over 10 million administrative bankruptcy records linked to the 2000 Decennial Census and the 2001-2009 American Community Surveys to understand who files for personal bankruptcy. Bankruptcy filers are middle income, more likely to be divorced, more likely to be black, more likely to have terminal high school degree or some college, and more likely to be middle-aged. Bankruptcy filers are more likely to be employed than the U.S. as a whole, and they are more likely to be employed 50-52 weeks. The bankruptcy population is aging faster than the U.S. population as a whole. Lastly, using the pseudo-panels I study what happens in the years around bankruptcy. Individuals are likely to get divorced in the years before bankruptcy and then remarry. Income falls before bankruptcy and then rises after bankruptcy.
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• Working Paper

  
  
  Credit Market Competition and the Nature of Firms
  

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  Authors: Nicola Cetorelli

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  Empirical studies show that competition in the credit markets has important effects on the entry and growth of firms in nonfinancial industries. This paper explores the hypothesis that the availability of credit at the time of a firm's founding has a profound effect on that firm's nature. I conjecture that in times when financial capital is difficult to obtain, firms will need to be built as relatively solid organizations. However, in an environment of easily available financial capital, firms can be constituted with an intrinsically weaker structure. To test this conjecture, I use confidential data from the U.S. Census Bureau on the entire universe of business establishments in existence over a thirty-year period; I follow the life cycles of those same establishments through a period of regulatory reform during which U.S. states were allowed to remove barriers to entry in the banking industry, a development that resulted in significantly improved credit competition. The evidence confirms my conjecture. Firms constituted in post-reform years are intrinsically frailer than those founded in a more financially constrained environment, while firms of pre-reform vintage do not seem to adapt their nature to an easier credit environment. Credit market competition does lead to more entry and growth of firms, but also to complex dynamics experienced by the population of business organizations.
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• Working Paper

  
  
  The Winner's Curse of Human Capital
  

  February 1999

  Authors: Thomas Astebro, Irwin bernhardt

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  CES-99-05

  We extend a model developed by Evans) to explain when start-ups are credit constrained. We show that the magnitude of the credit constraint is conditioned by the relative productivity of human capital in both wage work and self employment. Empirical analysis reveals that entrepreneurs with greater levels of human capital and entrepreneurial abilities have both greater financial wealth and greater levels of start-up capital pointing to the endogenous nature of credit constraints. Start-ups are generally financially constrained when measured by the impact on start-up capital of predicted household income. Greater levels of human capital relaxes financial constraints, apparently due to greater productivity of human capital in wage work than in self-employment. Paradoxically, then, those who are the least likely to be credit constrained in self-employment are those that are least likely to switch into self-employment, and vice versa.
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