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http://ssrn.com/abstract=847035
 
 

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A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy


Li Gan


Texas A&M University - Department of Economics; National Bureau of Economic Research (NBER)

Tarun Sabarwal


University of Kansas; Washington University, St. Louis

November 2005

NBER Working Paper No. w11763

Abstract:     
A test of adverse events and strategic timing theories can be conducted by determining whether some relevant financial decision variables, such as financial benefit from filing for bankruptcy, or debt discharged in bankruptcy are endogenous with the bankruptcy decision or not. For the strategic timing theory such decisions are endogenous, while for the adverse events theory they are not. Hausman tests for endogeneity show that financial benefit, unsecured debt, and non-exempt assets are exogenous with the bankruptcy decision, consistent with the adverse events theory.

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Date posted: February 8, 2006  

Suggested Citation

Gan, Li and Sabarwal, Tarun, A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy (November 2005). NBER Working Paper No. w11763. Available at SSRN: http://ssrn.com/abstract=847035

Contact Information

Li Gan (Contact Author)
Texas A&M University (TAMU) - Department of Economics ( email )
5201 University Blvd.
College Station, TX 77843-4228
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Tarun Sabarwal
University of Kansas ( email )
1415
Lawrence, KS 66045
United States
Washington University, St. Louis ( email )
One Brookings Drive
Saint Louis, MO 63130
United States
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