IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

How do bankruptcy laws affect entrepreneurship development around the world?

  • Lee, Seung-Hyun
  • Yamakawa, Yasuhiro
  • Peng, Mike W.
  • Barney, Jay B.
Registered author(s):

    How do bankruptcy laws as formal institutions affect entrepreneurship development around the world? Do entrepreneur-friendly bankruptcy laws encourage more entrepreneurship development at a societal level? We posit that if bankrupt entrepreneurs are excessively punished for failure, they may give up potentially high-return but inherently high-risk opportunities to start new businesses. Amassing a cross-country database from 29 countries spanning 19Â years (1990-2008), we find that lenient, entrepreneur-friendly bankruptcy laws are significantly correlated with the level of entrepreneurship development as measured by the rate of new firm entry.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0883902610000546
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 26 (2011)
    Issue (Month): 5 (September)
    Pages: 505-520

    as
    in new window

    Handle: RePEc:eee:jbvent:v:26:y:2011:i:5:p:505-520
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbusvent

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Claessens, Stijn & Klapper, Leora F., 2002. "Bankruptcy around the world - explanations of its relative use," Policy Research Working Paper Series 2865, The World Bank.
    2. Mike W Peng & Denis Y L Wang & Yi Jiang, 2008. "An institution-based view of international business strategy: a focus on emerging economies," Journal of International Business Studies, Palgrave Macmillan, vol. 39(5), pages 920-936, July.
    3. Lucian Arye Bebchuk, 2000. "Using Options to Divide Value in Corporate Bankruptcy," NBER Working Papers 7614, National Bureau of Economic Research, Inc.
    4. Lucian Arye Bebchuk, 2002. "Ex Ante Costs of Violating Absolute Priority in Bankruptcy," Journal of Finance, American Finance Association, vol. 57(1), pages 445-460, 02.
    5. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andre Shleifer, 2000. "The Regulation of Entry," Harvard Institute of Economic Research Working Papers 1904, Harvard - Institute of Economic Research.
    6. Jack A. Nickerson & Brian S. Silverman, 2003. "Why aren't all Truck Drivers Owner-Operators? Asset Ownership and the Employment Relation in Interstate for-hire Trucking," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 91-118, 03.
    7. Kawai, Hiroki & Urata, Shujiro, 2002. " Entry of Small and Medium Enterprises and Economic Dynamism in Japan," Small Business Economics, Springer, vol. 18(1-3), pages 41-51, Feb.- May.
    8. Goderis, Benedikt & Ioannidou, Vasso P., 2008. "Do high interest rates defend currencies during speculative attacks New evidence," Journal of International Economics, Elsevier, vol. 74(1), pages 158-169, January.
    9. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    10. Geert Hofstede, 2007. "Asian management in the 21st century," Asia Pacific Journal of Management, Springer, vol. 24(4), pages 411-420, December.
    11. Kenneth Ayotte, 2007. "Bankruptcy and Entrepreneurship: The Value of a Fresh Start," Journal of Law, Economics and Organization, Oxford University Press, vol. 23(1), pages 161-185, April.
    12. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August.
    13. Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2008. "Debt Enforcement around the World," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1105-1149, December.
    14. Andrei Shleifer & Lawrence H. Summers, 1987. "Breach of Trust in Hostile Takeovers," NBER Working Papers 2342, National Bureau of Economic Research, Inc.
    15. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    16. Wruck, Karen Hopper, 1990. "Financial distress, reorganization, and organizational efficiency," Journal of Financial Economics, Elsevier, vol. 27(2), pages 419-444, October.
    17. Zahra, Shaker A., 2007. "Contextualizing theory building in entrepreneurship research," Journal of Business Venturing, Elsevier, vol. 22(3), pages 443-452, May.
    18. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    19. Mark Broadie & Mikhail Chernov & Suresh Sundaresan, 2007. "Optimal Debt and Equity Values in the Presence of Chapter 7 and Chapter 11," Journal of Finance, American Finance Association, vol. 62(3), pages 1341-1377, 06.
    20. Michelle Alexopoulos & Ian Domowitz, . "Personal Liabilities and Bankruptcy Reform: An International Perspective," IPR working papers 98-8, Institute for Policy Resarch at Northwestern University.
    21. Gerard Caprio & Patrick Honohan, 1999. "Restoring Banking Stability: Beyond Supervised Capital Requirements," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 43-64, Fall.
    22. Katharina Pistor, 2000. "Patterns of legal change: shareholder and creditor rights in transition economies," Working Papers 49, European Bank for Reconstruction and Development, Office of the Chief Economist.
    23. Jeremy Berkowitz & Michelle J. White, 2004. "Bankruptcy and Small Firms' Access to Credit," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 69-84, Spring.
    24. Fan, Wei & White, Michelle J, 2003. "Personal Bankruptcy and the Level of Entrepreneurial Activity," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 543-67, October.
    25. Matthias Kahl, 2002. "Economic Distress, Financial Distress, and Dynamic Liquidation," Journal of Finance, American Finance Association, vol. 57(1), pages 135-168, 02.
    26. Oriana Bandiera & Gerard Caprio & Patrick Honohan & Fabio Schiantarelli, 2000. "Does Financial Reform Raise or Reduce Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 239-263, May.
    27. Christian Schade & Donald Siegel, 2008. "International issues in entrepreneurship," Small Business Economics, Springer, vol. 31(1), pages 1-3, June.
    28. John Armour & Douglas Cumming, 2005. "Bankruptcy Law and Entrepreneurship," ESRC Centre for Business Research - Working Papers wp300, ESRC Centre for Business Research.
    29. Mike Wright & Robert E. Hoskisson & Mike W. Peng, 2005. "Strategy Research in Emerging Economies: Challenging the Conventional Wisdom," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 1-33, 01.
    30. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-50, July.
    31. Hoetker, Glenn & Agarwal, Rajshree, 2005. "Death Hurts, But It Isn't Fatal: The Postexit Diffusion of Knowledge Created by Innovative Companies," Working Papers 05-0100, University of Illinois at Urbana-Champaign, College of Business.
    32. Zoltan Acs & Laszlo Szerb, 2007. "Entrepreneurship, Economic Growth and Public Policy," Small Business Economics, Springer, vol. 28(2), pages 109-122, March.
    33. Chuck C Y Kwok & Solomon Tadesse, 2006. "The MNC as an agent of change for host-country institutions: FDI and corruption," Journal of International Business Studies, Palgrave Macmillan, vol. 37(6), pages 767-785, November.
    34. Catherine Armington & Zoltan Acs, 2002. "The Determinants of Regional Variation in New Firm Formation," Regional Studies, Taylor & Francis Journals, vol. 36(1), pages 33-45.
    35. Arturo Bris & Ivo Welch & Ning Zhu, 2006. "The Costs of Bankruptcy: Chapter 7 Liquidation versus Chapter 11 Reorganization," Journal of Finance, American Finance Association, vol. 61(3), pages 1253-1303, 06.
    36. Joseph R. Mason, 2005. "A Real Options Approach to Bankruptcy Costs: Evidence from Failed Commercial Banks During the 1990s," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1523-1554, July.
    37. Young Choi & Phillip Phan, 2006. "The Influences of Economic and Technology Policy on the Dynamics of New Firm Formation," Small Business Economics, Springer, vol. 26(5), pages 493-503, 06.
    38. Julian R. Franks & Kjell G. Nyborg & Walter N. Torous, 1996. "A Comparison of UK, US and German Insolvency Codes," Financial Management, Financial Management Association, vol. 25(3), Fall.
    39. Gaston, Noel, 1997. "Efficiency wages, managerial discretion, and the fear of bankruptcy," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 41-59, May.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:jbvent:v:26:y:2011:i:5:p:505-520. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.