Working papers

Abstract: I study whether wealth protection in personal bankruptcy provides a second chance to failed entrepreneurs. I exploit windfall wealth from inheritances to proxy for exogenous variation in personal wealth after bankruptcy. Windfall wealth increases reentry to business only among entrepreneurs who did not experience severe losses in personal income or wealth before bankruptcy. Those who respond to windfall wealth by starting new businesses have lower profits, indicating their lower entrepreneurial quality. Overall, the findings suggest that bankruptcy policies increasing wealth protection can promote serial entrepreneurship, but their effectiveness is limited by low entrepreneurial quality and personal experience of severe losses.

Financial News & KAFA Doctoral Student Dissertation Award

Biased Judges? Judge Characteristics and Bankruptcy Outcomes [SSRN]

Abstract: Exploiting random assignment of judges to corporate bankruptcy filings, I examine the effect of judge characteristics on outcomes. First, I find that cases assigned to judges who grew up during the Great Depression are more likely to emerge from bankruptcy, whereas those assigned to judges with economics training and conservative political ideology are less likely to. Second, I show that case duration is shorter (longer) when the potential case outcome is consistent (inconsistent) with judges’ preferences. Third, the judge characteristics do not correlate with post-emergence outcomes. Overall, the findings suggest that the effect of judge characteristics may be concentrated in marginal cases where the economic benefits of liquidation versus emergence are not significantly different.

Best Dissertation Award at Conference on Asia-Pacific Financial Markets (2022)

Work in progress

Disqualifying Managerial Misconduct in Corporate Bankruptcy, with S. Lakshmi Naaraayanan and Kasper Meisner Nielsen

Abstract: This study examines the introduction of bankruptcy quarantines that disqualifies managers engaging in negligent business practices for up to 3 years. Using administrative register data from Denmark, we document that disqualifications discourage future business activity: After the quarantine, individuals are 15% less likely to be managers or business owners. Disqualified individuals are also less likely to be involved in future bankruptcies or future criminal activities. At the same time, the fraction of family members of disqualified individuals who are active in a management role increases from 10% to 30%. We also find changes to the managerial labor pool, resulting in more CEOs with a criminal record and those that rely solely on social transfers. Overall, our findings provide the first systematic evidence on the governance consequences of disqualifying managerial misconduct in corporate bankruptcies.