Personal Bankruptcy Law and New Business Formation

Bill Francis, Iftekhar Hasan and Haizhi Wang

The Financial Review, 2009, vol. 44, issue 4, 647-663

Abstract: Using a panel of all 50 U.S. states and the District of Columbia from 1990 to 1999, we report a nonlinear relation between state bankruptcy exemptions and new business formation. The rate of new business formation first increases as exemptions increase, but it then decreases. This result reflects the fact that bankruptcy exemptions tend to affect both demand for and supply of external financing to potential entrepreneurs.

Date: 2009
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