Personal Bankruptcy: Reconciling Adverse Events and Strategic Timing Hypotheses Using Heterogeneity in Filing Types
Li Gan (),
Tarun Sabarwal () and
Shuoxun Zhang ()
No 201008, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics
The strategic timing and adverse events hypotheses of personal bankruptcy have received particular attention. Existing research focuses on proving or disproving either hypothesis, using a strict interpretation of the role of financial benefit in the filing decision. Using a more realistic framework in which financial benefit may affect the filing decision in both hypotheses, we show that endogeneity of financial benefit is a distinguishing factor between the two hypotheses. Using two different datasets, we show that the endogeneity test favors the adverse events hypothesis. Extending the analysis to allow for both types, we find evidence of heterogeneity in filing types, consistent with both hypotheses. On average, approximately 16 percent of households are more likely to behave as strategic types and 84 percent as adverse events types. Several implications of these results are explored.
Keywords: Consumer bankruptcy; personal bankruptcy; adverse events; strategic timing (search for similar items in EconPapers)
JEL-codes: D12 D14 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2010-12, Revised 2011-05
References: View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Personal Bankruptcy: Reconciling Adverse Events and Strategic Filing Hypotheses Using Heterogeneity in Filing Types (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kan:wpaper:201008
Access Statistics for this paper
More papers in WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Professor Zongwu Cai ().