Insights into the Impact of Bankruptcy's Public Record on Entrepreneurial Activity: Evidence from Economic Experiments

47 Pages Posted: 18 Jul 2018  

Uwe Dulleck

Queensland University of Technology - School of Economics and Finance

Nicola J Howell

Queensland University of Technology - Faculty of Law

Ann-Kathrin Koessler

University of Osnabrück; Queensland University of Technology - Queensland Behavioral Economics Group (QuBE)

Rosalind F Mason

Queensland University of Technology - Faculty of Law

Date Written: June 26, 2018

Abstract

Many Anglo-American jurisdictions aim to provide debtors with a ‘fresh start’ after a personal bankruptcy. However, we query the extent to which debtors can achieve a fresh start if records of individual bankruptcies are publicly available, with no restrictions on their use.

To inform the legal policy question of whether bankruptcy records should be publicly available, we study the effect of the availability of bankruptcy records, compared to their non-existence, in an economic experiment. The experiment allows us to identify empirically the effect that the exposure of bankruptcy history has on the behaviour of investors and debtors. Our exploratory research shows that the availability of bankruptcy records increases investment. Availability also increases repayment behaviour by debtors, but only if the debtor has no history of bankruptcy (non-return of payments). If, however, a debtor failed to return payments in the past, and this information is available, debtors show lower instances of return behaviour.

Keywords: bankruptcy, investments, uncertainty, economic experiment, insolvency, public records, National Personal Insolvency Index

Suggested Citation

Dulleck, Uwe and Howell, Nicola J and Koessler, Ann-Kathrin and Mason, Rosalind F, Insights into the Impact of Bankruptcy's Public Record on Entrepreneurial Activity: Evidence from Economic Experiments (June 26, 2018). Available at SSRN: https://ssrn.com/abstract=3203132 or http://dx.doi.org/10.2139/ssrn.3203132

Uwe Dulleck

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Nicola Howell (Contact Author)

Queensland University of Technology - Faculty of Law ( email )

Level 4, C Block Gardens Point
2 George St
Brisbane, QLD 4000
Australia

Ann-Kathrin Koessler

University of Osnabrück ( email )

Germany

Queensland University of Technology - Queensland Behavioral Economics Group (QuBE) ( email )

2 George Street
GPO Box 2434
Brisbane, 4510
Australia

Rosalind F Mason

Queensland University of Technology - Faculty of Law ( email )

Level 4, C Block Gardens Point
2 George St
Brisbane, QLD 4000
Australia

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