Debtor protection and business dynamism

Geraldo Cerqueiro, María Fabiana Penas, Robert Seamans

    Research output: Contribution to journalArticle

    Abstract

    We study the effect of debtor protection on business dynamism. We find that greater debtor protection, in the form of more lenient personal bankruptcy laws, increases firm entry only in sectors requiring low start-up capital. We also find that debtor protection increases firm exit and job destruction rates among young small firms. This negative effect takes 3 years to materialize and is persistent. Finally, we provide evidence consistent with two mechanisms underlying these changes in business dynamism: a reduction in credit supply and entry of lower-quality firms following increases in debtor protection.

    Original languageEnglish (US)
    Pages (from-to)521-549
    Number of pages29
    JournalJournal of Law and Economics
    Volume62
    Issue number3
    DOIs
    StatePublished - Aug 1 2019

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Law

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  • Cite this

    Cerqueiro, G., Penas, M. F., & Seamans, R. (2019). Debtor protection and business dynamism. Journal of Law and Economics, 62(3), 521-549. https://doi.org/10.1086/704956