Bankruptcy Reform Act of 2005 and Entrepreneurial Activity

40 Pages Posted: 1 Jul 2010 Last revised: 8 Jan 2015

Yongwook Paik

Olin Business School, Washington University in St. Louis

Date Written: June 30, 2010

Abstract

This paper investigates the effect of the bankruptcy reform act of 2005, formally known as the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), on entrepreneurial activity, measured by the likelihood of switching into self-employment. The analysis of this paper suggests that the probability of becoming self-employed with an unincorporated firm, regardless of firm size, declined after the bankruptcy reform act of 2005, and in this way entrepreneurial activity decreased. On the other hand, the probability of becoming self-employed with an incorporated firm was virtually unchanged by the revised bankruptcy law. However, the size of the incorporated firm makes a difference with small incorporated firms being different from medium- or large- incorporated firms. That is, the probability of becoming self-employed with a small incorporated firm declined after the bankruptcy reform act of 2005 in a similar manner to the probability of becoming self-employed with an unincorporated firm, but the probability of becoming self-employed with a medium- or large-size incorporated firm does not change significantly.

Suggested Citation

Paik, Yongwook, Bankruptcy Reform Act of 2005 and Entrepreneurial Activity (June 30, 2010). Available at SSRN: https://ssrn.com/abstract=1632716 or http://dx.doi.org/10.2139/ssrn.1632716

Yongwook Paik (Contact Author)

Olin Business School, Washington University in St. Louis ( email )

1 Brookings Drive
Campus Box 1156
St. Louis, MO Missouri 63130
United States

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