Entrepreneurs’ legal infractions and hidden information: Evidence from small business bankruptcies

We study how entrepreneurs’ attitudes toward risk, as measured by their personal legal infractions, are related to information asymmetry and agency problems prior bankruptcy, using a sample of 260 small Swedish firms. find that auditor resignations more likely in firms where entrepreneurs have infractions. Furthermore, we infractions negatively the likelihood firm disclosing its annual report quality bookkeeping, suggesting severe when also creditors’ recovery rates bankruptcy lower if serious traffic offences, such driving under influence alcohol or without license.