Behavioral insights into the impact of bankruptcy’s public record on business activity

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  • Queensland University of Technology
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Details

Original languageEnglish
Pages (from-to)125-148
JournalInsolvency Law Journal
Volume2020
Issue number28
Publication statusE-pub ahead of print - 2020
Externally publishedYes

Abstract

Many Anglo-American jurisdictions, including Australia, aim to provide debtors with a “fresh start” after a personal bankruptcy. However, we query the extent to which debtors can achieve a fresh start if records of individual bankruptcies are publicly available, with no restrictions on their use.

To inform the legal policy question of whether bankruptcy records should be publicly available, we study in an economic experiment the effect of the availability of records of past behavior, compared to their non-existence. The experiment allows us to identify empirically the effect that the exposure of history of returns has on the behavior of investors and agents. Our exploratory research shows that the availability of records increases investment. Availability also increases repayment behavior by agents, but only if the agent has no history of non-return of payments. If, however, an agent failed to return payments in the past, and this information is available, agents show lower instances of return behavior. These findings may be translated to the personal insolvency environment to explore the impact of the public availability of bankruptcy records on debtors and investors, and to inform the legal policy question of whether, and for how long, public records should be available.

Cite this

Behavioral insights into the impact of bankruptcy’s public record on business activity. / Howell, Nicola; Koessler, Ann-Kathrin; Mason, Rosalind et al.
In: Insolvency Law Journal, Vol. 2020, No. 28, 2020, p. 125-148.

Research output: Contribution to journalArticleResearchpeer review

Howell, N, Koessler, A-K, Mason, R & Dulleck, U 2020, 'Behavioral insights into the impact of bankruptcy’s public record on business activity', Insolvency Law Journal, vol. 2020, no. 28, pp. 125-148. <https://eprints.qut.edu.au/205702/>
Howell, N., Koessler, A.-K., Mason, R., & Dulleck, U. (2020). Behavioral insights into the impact of bankruptcy’s public record on business activity. Insolvency Law Journal, 2020(28), 125-148. Advance online publication. https://eprints.qut.edu.au/205702/
Howell N, Koessler AK, Mason R, Dulleck U. Behavioral insights into the impact of bankruptcy’s public record on business activity. Insolvency Law Journal. 2020;2020(28):125-148. Epub 2020.
Howell, Nicola ; Koessler, Ann-Kathrin ; Mason, Rosalind et al. / Behavioral insights into the impact of bankruptcy’s public record on business activity. In: Insolvency Law Journal. 2020 ; Vol. 2020, No. 28. pp. 125-148.
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AB - Many Anglo-American jurisdictions, including Australia, aim to provide debtors with a “fresh start” after a personal bankruptcy. However, we query the extent to which debtors can achieve a fresh start if records of individual bankruptcies are publicly available, with no restrictions on their use.To inform the legal policy question of whether bankruptcy records should be publicly available, we study in an economic experiment the effect of the availability of records of past behavior, compared to their non-existence. The experiment allows us to identify empirically the effect that the exposure of history of returns has on the behavior of investors and agents. Our exploratory research shows that the availability of records increases investment. Availability also increases repayment behavior by agents, but only if the agent has no history of non-return of payments. If, however, an agent failed to return payments in the past, and this information is available, agents show lower instances of return behavior. These findings may be translated to the personal insolvency environment to explore the impact of the public availability of bankruptcy records on debtors and investors, and to inform the legal policy question of whether, and for how long, public records should be available.

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