Small Business Bankruptcy

Posted: 18 Nov 2016

See all articles by Michelle J. White

Michelle J. White

University of California, San Diego (UCSD) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 2016

Abstract

Bankruptcy is the legal process by which financially distressed firms and individuals resolve their debts. It is an important part of the legal environment for small business owners and their lenders because small businesses are very risky and often fail and because bankruptcy law affects how business owners and their lenders are treated in the event of failure. Both personal and corporate bankruptcy law are relevant for most small businesses, as even when businesses are incorporated, lenders often require that business owners personally guarantee loans to the business. This article discusses theoretical models and empirical tests of how bankruptcy law affects small business, including the effects of bankruptcy law on incentives to start and remain in business, how bankruptcy law affects small business credit, and whether bankruptcy law leads to efficient decisions concerning whether failing businesses reorganize or liquidate. Research using small business data from both the United States and other countries is covered in this survey.

Suggested Citation

White, Michelle J., Small Business Bankruptcy (October 2016). Annual Review of Financial Economics, Vol. 8, pp. 317-336, 2016. Available at SSRN: https://ssrn.com/abstract=2870866 or http://dx.doi.org/10.1146/annurev-financial-121415-032856

Michelle J. White (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
226
PlumX Metrics