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Measuring the Effect of Bankruptcy Laws on Entrepreneurship Across Countries

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  • Douglas J. Cumming

    (York University)

Abstract

Two recent papers examine the impact of corporate bankruptcy laws on new business start-ups in 29 countries over 1990 - 2008 (Peng et al., 2010; Lee et al., 2010). In this commentary, I briefly point out two significant issues which future researchers might want to consider. First, several countries in the data examined had changed their personal and corporate bankruptcy laws over the years studied. It is statistically inappropriate and inaccurate to treat bankruptcy laws as time invariant, as in Peng et al. (2010) and Lee et al. (2010), particularly in view of the dramatic changes in bankruptcy laws over time in so many countries. Second, Peng et al. (2010) and Lee et al. (2010) have a misplaced focus on corporate bankruptcy law while ignoring personal bankruptcy law. This focus is at odds with theory and prior work on topic which relates entrepreneurship to personal bankruptcy law.

Suggested Citation

  • Douglas J. Cumming, 2012. "Measuring the Effect of Bankruptcy Laws on Entrepreneurship Across Countries," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 16(1), pages 80-86, Spring.
  • Handle: RePEc:pep:journl:v:16:y:2012:i:1:p:80-86
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    Citations

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    Cited by:

    1. Muge Adalet McGowan & Dan Andrews & Valentine Millot, 2017. "Insolvency regimes, zombie firms and capital reallocation," OECD Economics Department Working Papers 1399, OECD Publishing.
    2. Saul Estrin & Tomasz Mickiewicz & Anna Rebmann, 2017. "Prospect theory and the effects of bankruptcy laws on entrepreneurial aspirations," Small Business Economics, Springer, vol. 48(4), pages 977-997, April.
    3. Frank M. Fossen & Johannes König, 2016. "Personal Bankruptcy Law and Entrepreneurship," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(4), pages 28-34, 02.
    4. repec:ces:ifodic:v:13:y:2016:i:4:p:19191583 is not listed on IDEAS
    5. William R. Kerr & Ramana Nanda & Matthew Rhodes-Kropf, 2014. "Entrepreneurship as Experimentation," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 25-48, Summer.

    More about this item

    Keywords

    Bankruptcy; Bankruptcy Law; Entrepreneurship;

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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