Does Bankruptcy Law Affect Business Turnover? Evidence from New and Existing Business

14 Pages Posted: 27 Nov 2015

See all articles by Shawn Rohlin

Shawn Rohlin

Kent State University - Department of Economics

Amanda Ross

University of Alabama - Culverhouse College of Commerce & Business Administration

Date Written: January 2016

Abstract

This study examines how differences in state bankruptcy laws, specifically the homestead exemption, affect business turnover by studying both new and existing businesses. We focus on areas just near state boundaries to control for unobserved local attributes to better isolate the effect of more wealth protection. We find that an increase in the homestead exemption attracts new businesses but also has a positive impact on existing businesses, suggesting that asset protection through bankruptcy law encourages successful entrepreneurs to incur the risks. Our results indicate that the personal bankruptcy law is an important policy tool that governments can use to encourage business growth without causing business turnover.

JEL Classification: K30, K36, R11, R1

Suggested Citation

Rohlin, Shawn and Ross, Amanda, Does Bankruptcy Law Affect Business Turnover? Evidence from New and Existing Business (January 2016). Economic Inquiry, Vol. 54, Issue 1, pp. 361-374, 2016, Available at SSRN: https://ssrn.com/abstract=2695898 or http://dx.doi.org/10.1111/ecin.12230

Shawn Rohlin (Contact Author)

Kent State University - Department of Economics ( email )

Kent, OH 44242
United States

Amanda Ross

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

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