A new study led by scholars from Rutgers Business School in New Jersey and the University of Delaware has identified gender disparities in the outcomes of bankruptcy filings between women- and men-owned firms.
In an examination of a large sample of U.S. small-business bankruptcies, the authors found women-owned firms are 24 percent more likely to file under Chapter 7 (liquidating a firm’s assets to pay creditors), and, conditional on Chapter 11 (reorganizing a firm’s finances while continuing operations), are less likely to receive a discharge. Notably, an analysis of 1.9 million Small Business Administration loan records revealed little difference in pre-credit quality between women- and men-owned firms, suggesting the gender disparities in bankruptcy outcomes are not a result of simple creditworthiness, but rather due to challenges within the bankruptcy process itself.
The authors also identified gender disparities in the bankruptcy process regarding judicial capacity and court congestion. The discharge penalty for women-owned firms is concentrated among judges with high caseloads. Furthermore, the gap in bankruptcy widens in courts with judiciary vacancies, which leave surviving judges with larger caseloads. In more congested courts, women business-owners are more likely to file under Chapter 7 than under Chapter 11.
According to the authors, their “evidence points to a post-failure institutional friction in entrepreneurship,” with women business owners less likely than their male counterparts to receive a second chance at maintaining their operations.