A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy
Issue Date
2012-04-18Published Version
http://www.nber.org/papers/w11763Metadata
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A test of adverse events and strategic timing theories can be conducted by determining whether some
relevant financial decision variables, such as financial benefit from filing for bankruptcy, or debt
discharged in bankruptcy are endogenous with the bankruptcy decision or not. For the strategic
timing theory such decisions are endogenous, while for the adverse events theory they are not.
Hausman tests for endogeneity show that financial benefit, unsecured debt, and non-exempt assets
are exogenous with the bankruptcy decision, consistent with the adverse events theory.
Description
Gan, Li and Sabarwal, Tarun, (2005), A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy, No 11763, NBER Working Papers, National Bureau of Economic Research, Inc. This working paper is ©2005 by Li Gan and Tarun Sabarwal. All rights reserved. Short sections of text, not to exceed two
paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given
to the source.
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Citation
Gan, Li and Sabarwal, Tarun, (2005), A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy, No 11763, NBER Working Papers, National Bureau of Economic Research, Inc.
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