scispace - formally typeset
Search or ask a question
Author

Michelle J. White

Bio: Michelle J. White is an academic researcher from University of Cape Town. The author has contributed to research in topics: Bankruptcy & Debt. The author has an hindex of 46, co-authored 151 publications receiving 8106 citations. Previous affiliations of Michelle J. White include National Bureau of Economic Research & University of Pennsylvania.
Topics: Bankruptcy, Debt, Insolvency, Default, Foreclosure


Papers
More filters
Journal ArticleDOI
TL;DR: In this paper, the authors used the Panel Study of Income Dynamics (PSI) data to estimate a model of households' bankruptcy decisions and found support for the strategic model of bankruptcy, which predicts that households are more likely to file when their financial benefit from filing is higher.
Abstract: Personal bankruptcy filings have risen from 0.3 percent of households per year in 1984 to around 1.35 percent in 1998 and 1999, transforming bankruptcy from a rare occurrence to a routine event. Lenders lost about $39 billion in 1998 due to personal bankruptcy filings. But economists have little understanding of why households file for bankruptcy or why filings have increased so rapidly. Until very recently, studying the household bankruptcy decision was very difficult, because no household-level data set existed that included information on bankruptcy filings. In this paper, we use new data from the Panel Study of Income Dynamics, which includes information on bankruptcy filings, to estimate a model of households’ bankruptcy decisions. We find support for the strategic model of bankruptcy, which predicts that households are more likely to file when their financial benefit from filing is higher. Our model predicts that an increase of $1,000 in households’ financial benefit from bankruptcy would result in a 7-percent increase in the number of bankruptcy filings. Our model also predicts that if the 1997 National Bankruptcy Review Commission’s proposed changes in bankruptcy exemption levels were implemented, there would be a 16-percent increase in the number of bankruptcy filings each year. But if the $100,000 cap on homestead exemptions recently passed by the U.S. Senate were adopted, our model predicts that there would be only a negligible effect on the number of filings. We find little support for the nonstrategic model of bankruptcy which predicts that households file when adverse events occur which reduce their ability to repay. Finally, controlling for state and time fixed effects, our model shows that households are more likely to file for bankruptcy if they live in districts with higher aggregate filing rates.

475 citations

Posted Content
TL;DR: This paper found that children of homeowners have better outcomes than children of renters whether their parents make a large or small initial investment in their home, as long as they make a minimal down payment when they buy their homes.
Abstract: We find that children of homeowners have better outcomes than children of renters whether their parents make a large or small initial investment in their home, as long as they make a minimal down payment when they buy their homes. Children with parents who made no down payment have similar outcomes to children of renters. The effect of homeownership holds up under myriad specifications, measuring initial housing investment as either an LTV ratio or a down payment dollar amount, and controlling for parent and family characteristics and geographic and year fixed effects.

475 citations

Journal ArticleDOI
TL;DR: The authors examined whether home ownership benefits children by testing whether children of homeowners stay in school longer than children of renters and whether daughters of homeowners are less likely to have children as teenagers than daughters of renters.

473 citations

Journal ArticleDOI
TL;DR: In this article, the authors suggest that firms in bankruptcy might not always always be economically inefficient and that inefficient firms might not necessarily end up in bankruptcy, rather, firms may shut down and file for bankruptcy versus continuing to operate because managers respond to the potential for redistribution from creditors to equity.
Abstract: A central tenet in economics is that competition drives markets toward a state of long-run equilibrium in which those firms remaining in existence produce at minimum average costs. In the transition to long-run equilibrium, inefficient firms, firms using obsolete technologies and those producing products that are in excess supply are eliminated. Consumers benefit because in the long run, goods and services are produced and sold at the lowest possible prices. The legal mechanism through which inefficient firms most often are eliminated is that of bankruptcy. In 1984, around 62,000 business firms filed for bankruptcy. Two-thirds of them filed to liquidate in bankruptcy and the rest filed to reorganize in bankruptcy (Administrative Office of the U.S. Courts, 1985). The total liabilities of firms that filed for bankruptcy in 1985 came to approximately $33 billion (Dun & Bradstreet, 1986).1 Economic theory suggests that bankruptcy should serve as a screening process designed to eliminate only those firms that are economically inefficient and whose resources could be better used in some other activity. However, firms typically file for bankruptcy voluntarily. When they do, creditors are not all repaid in full and large redistributional effects occur. Managers of firms do not take creditors' losses fully into account in deciding either how to run the firm or whether and when to file for bankruptcy. This suggests that firms in bankruptcy might not always be economically inefficient and that inefficient firms might not always end up in bankruptcy. Rather, firms may shut down and file for bankruptcy versus continuing to operate because managers respond to the potential for redistribution from creditors to equity, rather

461 citations

Journal ArticleDOI
TL;DR: The authors examined how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit and found that they increase the amount of credit held by high-asset households and reduce the availability and amount available credit to low-assets households.
Abstract: This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policy-makers as benefiting less-well-off borrowers, our results using data from the 1983 Survey of Consumer Finances suggest that they increase the amount of credit held by high-asset households and reduce the availability and amount of credit to low-asset households, conditioning on observable characteristics. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets. Interest rates on automobile loans for low-asset households also appear to be higher in high exemption states.

459 citations


Cited by
More filters
Posted Content
TL;DR: This paper examined legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries and found that common law countries generally have the best, and French civil law countries the worst, legal protections of investors.
Abstract: This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.

14,563 citations

Posted Content
TL;DR: The authors surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world, and presents a survey of the literature.
Abstract: This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world.

13,489 citations

Posted Content
TL;DR: In this paper, the authors investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries and find that factors identified by previous studies as important in determining the cross-section of the capital structure in the U.S. affect firm leverage in other countries as well.
Abstract: We investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries. At an aggregate level, firm leverage is fairly similar across the G-7 countries. We find that factors identified by previous studies as important in determining the cross- section of capital structure in the U.S. affect firm leverage in other countries as well. However, a deeper examination of the U.S. and foreign evidence suggests that the theoretical underpinnings of the observed correlations are still largely unresolved.

5,935 citations

Posted Content
TL;DR: The authors argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years and that the recent increase in inequality is most likely due to an acceleration in skill bias.
Abstract: This essay discusses the effect of technical change on wage inequality. I argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years. Furthermore, the recent increase in inequality is most likely due to an acceleration in skill bias. In contrast to twentieth century developments, most technical change during the nineteenth century appears to be skill-replacing. I suggest that this is because the increased supply of unskilled workers in the English cities made the introduction of these technologies profitable. On the other hand, the twentieth-century has been characterized by skill-biased technical change because the rapid increase in the supply of skilled workers has induced the development of skill-complementary technologies. The recent acceleration in skill bias is in turn likely to have been a response to the acceleration in the supply of skills during the past several decades.

2,378 citations

Journal ArticleDOI
TL;DR: In this article, the authors propose a more complete conceptual framework for analysis of SME credit availability issues, and emphasize a causal chain from policy to financial structures, which affect the feasibility and profitability of different lending technologies.
Abstract: We propose a more complete conceptual framework for analysis of SME credit availability issues. In this framework, lending technologies are the key conduit through which government policies and national financial structures affect credit availability. We emphasize a causal chain from policy to financial structures, which affect the feasibility and profitability of different lending technologies. These technologies, in turn, have important effects on SME credit availability. Financial structures include the presence of different financial institution types and the conditions under which they operate. Lending technologies include several transactions technologies plus relationship lending. We argue that the framework implicit in most of the literature is oversimplified, neglects key elements of the chain, and often yields misleading conclusions. A common oversimplification is the treatment of transactions technologies as a homogeneous group, unsuitable for serving informationally opaque SMEs, and a frequent misleading conclusion is that large institutions are disadvantaged in lending to opaque SMEs.

1,706 citations