Moral Hazard versus Liquidity in Household Bankruptcy

• 成果类型: Article
• 署名作者: Indarte, Sasha
• 署名单位: University of Pennsylvania; University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13263
• 发表日期: 2023
• 页码: 2421-2464
• 关键词: regression discontinuity design; consumer bankruptcy; negative equity; MORTGAGE MODIFICATION; Debt relief; default; credit; MARKET; INFORMATION; RISK

摘要

This paper studies the role of moral hazard and liquidity in driving household bankruptcy. First, I estimate that increases in potential debt forgiveness have a positive, but small, effect on filing using a regression kink design. Second, exploiting quasi-experimental variation in mortgage payment reductions, I estimate that filing is five times more responsive to cash-on-hand than relief generosity. Using a sufficient statistic, I show the estimates imply large consumption-smoothing benefits of bankruptcy for the marginal filer. Finally, I conclude that 83% of the filing response to dischargeable debt comes from liquidity effects rather than a moral hazard response to financial incentives.