Bankruptcy Regulation and Self-Employment Entry: The Moderating Roles of Income Share, Parenthood, and Hybrid Entrepreneurship

Matthias Schulz*, Christian Schwens, Christian Fisch

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

We investigate how individual factors moderate the impact of bankruptcy exemption levels—that is, the amount of wealth individuals can keep in case of bankruptcy—on entry into self-employment. Conceptually, we combine Prospect Theory’s axiom of diminishing sensitivity with insights from research on entrepreneurial failure. We hypothesize that individuals who face higher financial, social, or psychological costs because of bankruptcy will be less sensitive to higher exemption levels than will those who face lower costs across these dimensions. Our empirical results, which are based on a quasi-natural experiment in the United States, support our theoretical predictions.

Original languageEnglish
Pages (from-to)1-28
Number of pages28
JournalEntrepreneurship: Theory and Practice
Volume45
Issue number6
DOIs
Publication statusPublished - 21 Jun 2021

Bibliographical note

JEL Classification: L26, L51
Publisher Copyright:
© The Author(s) 2021.

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