Premium
Impact of State Exemption Laws on Small Business Bankruptcy Decision
Author(s) -
Agarwal Sumit,
Chomsisengphet Souphala,
Liu Chunlin,
Mielnicki Lawrence
Publication year - 2005
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2005.tb00663.x
Subject(s) - bankruptcy , small business , business , hazard model , state (computer science) , actuarial science , bankruptcy prediction , law , economics , finance , political science , algorithm , computer science
To provide further insights into the current debate on consumer bankruptcy, this article empirically assesses the impact of state bankruptcy exemption levels on the likelihood of small business owners filing for bankruptcy. We estimate a proportional hazard model of small business bankruptcy using a unique panel data set of over 43,000 small business credit card holders over a two‐year period from May 2000 to May 2002. Overall, our results indicate that for every $10,000 increase in a state's homestead exemptions, the risk of small business bankruptcy increases by 8%. Moreover, we also find that the likelihood of small business owners filing for bankruptcy will rise by 4% with a $1000 increase in personal property exemption levels.