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

Bankruptcy Quarantines, with Kasper Meisner Nielsen

Abstract: This study examines the introduction of bankruptcy quarantines in Denmark. Quarantines disqualify managers of bankrupt limited liability companies for up to 3 years if the bankruptcy court finds them guilty of gross negligent business practices. We find evidence consistent with quarantines discouraging future business activity and negligence: After the expiry of the bankruptcy quarantines, quarantined individuals are 15\% less likely to be managers or owners. Quarantined individuals are also less likely to be involved in future bankruptcies or future criminal activities. Strawmen appointments seem to be the main negative side effect of quarantines: During the quarantine, the fraction of families that are active in management increases from 10% to 30%. Strawmen appointments change the managerial labor pool, resulting in an increasing fraction of managers that are foreign residents or receive social transfers. Overall, our findings provide the first systematic evidence on the consequences of bankruptcy quarantines.