TY - JOUR
T1 - Debtor protection and business dynamism
AU - Cerqueiro, Geraldo
AU - Penas, María Fabiana
AU - Seamans, Robert
N1 - Funding Information:
We thank Santiago Barraza, Uli Hege, Johan Hombert, Thorsten Martin, Fabiano Schivardi, and Felipe Severino; participants at the 2017 National Bureau of Economic Research’s Entrepreneurship Working Group meeting and the 2018 HEC Paris Workshop on Entrepreneurship; and seminar participants at the University of Zurich, Torcuato Di Tella University, the University of San Andrés, and the Corporacion Andina de Fomento Development Bank of Latin America. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. This research uses data from the Census Bureau’s Longitudinal Employer Household Dynamics Program, which was partially supported by National Science Foundation grants SES-9978093, SES-0339191, and ITR-0427889; National Institute on Aging grant AG018854; and grants from the Alfred P. Sloan Foundation. Cerqueiro acknowledges financial support from grants UID/ GES/00407/2013 and PTDC/EGE-OGE/30314/2017 of the Portuguese Foundation for Science and Technology.
Publisher Copyright:
© 2019 by The University of Chicago. All rights reserved.
PY - 2019/8/1
Y1 - 2019/8/1
N2 - 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.
AB - 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.
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U2 - 10.1086/704956
DO - 10.1086/704956
M3 - Article
AN - SCOPUS:85075807044
VL - 62
SP - 521
EP - 549
JO - Journal of Law and Economics
JF - Journal of Law and Economics
SN - 0022-2186
IS - 3
ER -