What Really Drives Bankruptcy?

sep. 30, 2024

Sasha Indarte, Assistant Professor of Finance at Wharton, discusses her research on the influence of moral hazard and liquidity on household bankruptcies and how these dynamics may shift with the global rise in consumer debt.

Indarte recently visited Stockholm to speak at a conference hosted by the Swedish House of Finance, titled "Rethinking Household Debt Relief: Should Swedes Be More Forgiving?". In this interview, she discussed:

"Moral hazard" and "liquidity", and how they influence bankruptcy filings
If liquidity problems will continue to be the primary driver of bankruptcies with the rise of consumer debt globally.
Bankruptcies in Sweden vs. the U.S.

What Really Drives Bankruptcy?

"If we strengthen the social safety net, I would expect us to see fewer bankruptcies, and among the bankruptcies, we would continue to see they're more likely going to be due to this moral hazard, rather than this liquidity or insurance motive. If we weaken our social safety nets, then I would expect the opposite."

- Sasha Indarte

Sasha Indarte

Assistant Professor of Finance at the Wharton School, University of Pennsylvania.