Life After Death: A Field Experiment with Small Businesses on Information Frictions, Stigma, and Bankruptcy

Shai Bernstein, Emanuele Colonnelli, Mitchell Hoffman and Benjamin Iverson

No 30933, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In an RCT with US small businesses, we document that a large share of firms are not well-informed about bankruptcy. Many assume that bankruptcy necessarily entails the death of a business and do not know about Chapter 11, where debts are renegotiated so that the business can continue operating. Firms also exhibit bankruptcy-related stigma, believing that bankruptcy is embarrassing, a sign of failure, and a negative signal to employees and customers. Short educational videos that address information or stigma increase knowledge and decrease stigma, both immediately and durably over 4 months. Videos increase reported interest in using Chapter 11 bankruptcy and increase intended debt and investment. However, we do not observe long-term real effects. A survey of bankruptcy attorneys and judges points to entrepreneurs’ overconfidence and, to a lesser extent, excessive perceived legal fees as first-order frictions explaining the limited real impact of treatments that only address information and stigma.

JEL-codes: G33 M5 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-ent and nep-exp
Note: CF LE LS PR
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.nber.org/papers/w30933.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:30933

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30933

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().