Life After Death: A Field Experiment with Small Businesses on Information Frictions, Stigma, and Bankruptcy
In an RCT with US small businesses, we document that a large share of firms are not well-informed about bankruptcy. Many assume that bankruptcy necessarily entails the death of a business and do not know about Chapter 11 bankruptcy, where debts are renegotiated so that the business can continue operating. Small businesses are also unaware of a recent major reform that lowered the costs of bankruptcy procedures to enhance their protection.