Wealth Protection in Bankruptcy and Serial Entrepreneurship

76 Pages Posted: 23 Nov 2024 Last revised: 4 Feb 2025

See all articles by Donghyun Kang

Donghyun Kang

Erasmus University Rotterdam (EUR) - Department of Business Economics

Date Written: December 1, 2023

Abstract

I study whether protecting post-bankruptcy wealth provides a second chance to failed entrepreneurs. I exploit windfall wealth from inheritances to proxy for exogenous variation in wealth after personal bankruptcy. Windfall wealth increases reentry to business only among entrepreneurs who did not experience severe losses in personal income or wealth before bankruptcy. Those who respond to windfall wealth by starting new businesses have lower profits, indicating their lower entrepreneurial quality. Overall, the findings suggest that bankruptcy policies increasing wealth protection can promote serial entrepreneurship, but their effectiveness is limited by low entrepreneurial quality and personal experience of severe losses.

Keywords: personal bankruptcy, entrepreneurship, second-chance policy

Suggested Citation

Kang, Donghyun, Wealth Protection in Bankruptcy and Serial Entrepreneurship (December 1, 2023). Available at SSRN: https://ssrn.com/abstract=5030329 or http://dx.doi.org/10.2139/ssrn.5030329

Donghyun Kang (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Business Economics ( email )

Netherlands

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