We document the distortionary effects of accounting-based regulation on reported earnings. In India only firms with negative book value of equity (networth) can seek bankruptcy protection. Using a novel dataset of bankrupt firms from India, we show that firms manage earnings downward to seek bankruptcy protection. Strengthening creditor rights reduces downward earnings management among non-grou...

In this paper, we empirically assess the role of individual social capital on personal bankruptcy and default outcomes in the consumer credit market. After controlling for a borrower’s risk score, debt, income, wealth, and legal and economic environments, we find that default/bankruptcy risk rises and then falls over the lifecycle, while a borrower who owns a home or is married has a lower risk...

Much has been written about the relationship between high medical expenses and the likelihood of filing for bankruptcy, but the relationship between receiving a cancer diagnosis and filing for bankruptcy is less well understood. We estimated the incidence and relative risk of bankruptcy for people age twenty-one or older diagnosed with cancer compared to people the same age without cancer by co...

This paper characterizes the optimal bankruptcy exemption for risk averse borrowers who use unsecured contracts but have the possibility of defaulting. It provides a novel general formula — which holds in a wide variety of environments — for the optimal exemption as a function of a few observable sufficient statistics. Knowledge of borrowers’ leverage, the sensitivity of the interest rate sched...

The aim of this study is to investigate the effects of corporate governance mechanisms in preventing the bankruptcy of companies listed in Tehran Stock Exchange. For this purpose, corporate governance mechanisms, including institutional ownership, non-executive members of the board, CEO dual responsibility and free float stock are determined as independent variables and Bankruptcy based on the ...

We make three points. First, ex ante e¢ cient contracts often require ex post ine¢ ciency. Second, the time inconsistency problem for the government is more severe than for private agents because …re sale e¤ects give governments stronger incentives to renegotiate contracts than private agents. Third, given that the government cannot commit itself to not bailing out …rms ex post, ex ante regulat...

This paper investigates the consequences of Chapter 7 liquidation and Chapter 11 reorganization on the reallocation and subsequent utilization of assets in bankruptcy. We identify 129,000 bankrupt establishments and construct a novel dataset that tracks the occupancy and utilization of real estate assets over time. Asset reallocation is widespread, as nearly 80% of real estate is not occupied b...

Credit card default losses increased dramatically in the 80s and 90s, from 3% to over 5% of outstanding debt. We explore whether technological progress in debt collection is behind this change by developing a new theory featuring costly state verification with signals. We motivate our approach by the predominance of informal bankruptcy in the credit card market, which necessitates the costly in...

The main objective of a financial distress prediction model is to generate early warning signals.In this paper, we compare five bankruptcy prediction models, logit ,ANN ,CART, C5.0 and GP decision tree. Our empirical results reveal that the GP decision tree can outperform all the classifiers either in overall percentage of correct or k-fold cross validation test in out-sample. That is to say, G...

We develop a theoretical model in which firms are either private or state-owned. When firms become insolvent, the government can intervene with general measures, like subsidies, or by nationalizing firms. The government only intervenes when the bankruptcy of a firm entails social costs. In a stylized model, we analyze how government interventions affect allocative and productive efficiency. Nat...