Anand Jha’s Paper on Societal Trust and Corporate Bankruptcy Efficiency Published in Journal of Financial Stability

Anand Jha, Professor of Finance and Chair of Department of Finance at the Mike Ilitch School of Business had his publication, “Societal Trust and Corporate Bankruptcy,” accepted in the Journal of Financial Stability. This paper was co-authored with Renee Oyotode-Adebile from the University of Wisconsin-Parkside and Zubair Raja from Thompson Rivers University, Canada. 

This paper tackles societal trust as it significantly impacts the efficiency of bankruptcy processes, with faster resolutions, more likely outcomes, and lower value loss. This effect is more pronounced in low-income countries and corrupt ones. The study uses survey data from 99 countries from 2004 to 2020. 


We find that societal trust—the extent to which residents of a country trust others—is associated with a more efficient bankruptcy process. Bankruptcy resolutions are faster, efficient outcomes are more likely, and the value lost during the bankruptcy process is lower in countries with higher societal trust. This effect of societal trust on the efficiency of the bankruptcy process is more pronounced in countries with low-income per capita, and in corrupt countries. Our results are derived from the analysis of survey data concerning the outcomes of a hypothetical firm's bankruptcy in 99 countries from 2004 to 2020, a dataset also utilized by Djankov et al. (2008). 


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