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Bankruptcy, Discharge, and the Emergence of Debtor Rights in Eighteenth-Century England

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  • CARLOS, ANN M.
  • KOSACK, EDWARD
  • PENARRIETA, LUIS CASTRO

Abstract

Bankruptcy is a precise legal process defining, ex ante, the rules for allocation of assets when debtors fail to repay their legally constituted debts. Ultimately, these rules determine willingness to lend and to borrow, and thus economic growth. In 1706, Parliament in England passed a bankruptcy statute that allowed, for the first time, bankrupts to exit the state of bankruptcy prior to full repayment of all debts. This represented a fundamental change in English bankruptcy rules: creditors could now choose to discharge a bankrupt. Obviously, bankrupts benefitted from such a discharge, but creditors could also benefit from greater asset revelation. We document that discharge was quickly adopted, and estimate that many bankrupts received a second chance in business.

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  • Carlos, Ann M. & Kosack, Edward & Penarrieta, Luis Castro, 2019. "Bankruptcy, Discharge, and the Emergence of Debtor Rights in Eighteenth-Century England," Enterprise & Society, Cambridge University Press, vol. 20(2), pages 475-506, June.
    • Handle: RePEc:cup:entsoc:v:20:y:2019:i:02:p:475-506_00
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    Cited by:

    1. Braggion, Fabio & Frehen, Rik & Jerphanion, Emiel, 2020. "Credit Provision and Stock Trading: Evidence from the South Sea Bubble," CEPR Discussion Papers 14532, C.E.P.R. Discussion Papers.

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