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Ben Iverson

Working Papers

Spillovers from Financial Distress and Bankruptcy: Evidence and Implications for the Real Economy, with Maxwell Dunbar, March 2026.

In preparation for publication in The Annual Review of Financial Economics

Abstract: Bankruptcy reallocates assets, labor, and risk across firms and households, yet its consequences extend far beyond those directly involved. This article reviews recent empirical and theoretical advances on spillovers from financial distress and bankruptcy—the transmission of financial distress through labor markets, product markets, supply chains, financial networks, and social interactions. We bring together evidence on how corporate bankruptcy affects workers, competitors, suppliers, and local economies, and how these effects aggregate to influence economic outcomes more broadly. We also highlight emerging evidence on consumer bankruptcy spillovers within peer and family networks. The literature consistently shows that these spillovers are substantial and operate through multiple channels. Throughout, we identify open questions about their welfare implications, the design of optimal bankruptcy policy, and opportunities to better characterize spillovers that have not yet been explored.

The Dynamics of Retail Deposit Balances, with Bronson Argyle, Jason Kotter, Taylor Nadauld, and Christopher Palmer, January 2026.

Revise and Resubmit, Journal of Financial Economics

Abstract: We investigate the dynamics of household deposits using account-level data from 12 million accounts across 154 U.S. credit unions. Significant skewness in the retail deposit distribution---with 10% of depositors controlling 70% of total deposits---means large-balance accounts drive aggregate retail deposit flows. On average, high-balance accounts become large after significant one-time inflows and are more likely to experience large, idiosyncratic drawdowns. Unlike low-balance households, high-balance retail depositors are not sensitive to interest rate shocks. Additional evidence suggests that overall retail deposit stickiness is driven by high-balance accounts that are used as medium-run liquidity stores rather than for interest income.

Racial Disparities and Bias in Consumer Bankruptcy, with Bronson Argyle, Sasha Indarte, and Christopher Palmer, July 2025.

Revise and Resubmit, Journal of Finance

Abstract: Using the near universe of US bankruptcy cases linked to filer, trustee, and judge race data, we show that minority filers are significantly more likely to be dismissed without debt relief. To test whether racial bias contributes to these disparities, we formalize new econometric results for a “differences-in-disparities” research design that, in contrast to outcome tests, does not require specifying decision-maker objectives. We find random assignment to White trustees increases dismissal rates for minority filers in Chapter 13 but not in Chapter 7, where trustee discretion is limited. Our test indicates racial bias is an important factor in bankruptcy dismissals.

Life After Death: A Field Experiment with Small Businesses on Information Frictions, Stigma, and Bankruptcy, with Shai Bernstein, Emanuele Colonnelli, and Mitch Hoffman, May 2024.

Revise and Resubmit, Journal of Finance

Abstract: In an RCT with US small businesses, we document that a large share of firms are not well-informed about bankruptcy. Many assume that bankruptcy necessarily entails the death of a business and do not know about Chapter 11, where debts are renegotiated so that the business can continue operating. Firms also exhibit bankruptcy-related stigma, believing that bankruptcy is embarrassing, a sign of failure, and a negative signal to employees and customers. Short educational videos that address information or stigma increase knowledge and decrease stigma, both immediately and durably over 4 months. Videos increase reported interest in using Chapter 11 bankruptcy and increase intended debt and investment. However, we do not observe long-term real effects. Three years after the main RCT, we replicate our experiment on a totally different sample of larger firms, all of whom face substantial debt, and obtain the same results. A survey of bankruptcy attorneys and judges points to entrepreneurs' overconfidence and, to a lesser extent, excessive perceived legal fees as first-order frictions explaining the limited real impact of treatments that only address information and stigma.

Video links: [Control Video] [Information Video] [Information+Stigma Video]

Personal Bankruptcy and the Accumulation of Shadow Debt, with Bronson Argyle, Taylor Nadauld, and Christopher Palmer, December 2021.

Abstract: Before filing for bankruptcy, many households incur debt not reported to credit bureaus through the nonpayment of goods and services. Such “shadow debt” is an important liquidity source for distressed debtors; using new liability-level data, we estimate 44% of unsecured debt reported at bankruptcy is shadow debt. We use wage garnishment rules to isolate shocks to the benefits of bankruptcy filing and test for a particular reliance on shadow debt immediately before bankruptcy. We find that a $100 decrease in monthly wage garnishing results in an increase in shadow debt of $6,000 and an extra month delay in bankruptcy filing.

Trade Creditors' Information Advantage, with Victoria Ivashina, January 2018.
Abstract: Using information on the sales of debt claims for 132 U.S. Chapter 11 bankruptcy cases, we show that large trade creditors’ decisions to sell receivables of a distressed company in bankruptcy are predictive of lower recovery rates, and that in such cases these creditors sell ahead of less informed suppliers and other creditors. This result is especially pronounced for more opaque distressed firms, when trade creditors’ information advantage is likely largest. This evidence shows that suppliers that extend significant amounts of trade credit hold private information about their trade partners. Trade creditors who are geographically closer or in similar industries tend to lend the most, suggesting that these are two channels through which suppliers hold an information advantage.

Publications

Can Small Businesses Survive Chapter 11?, with Edith Hotchkiss and Xiang Zheng, Journal of Finance, forthcoming.

Financial Costs of Judicial Inexperience, with Josh Madsen, Wei Wang, and Qiping Xu, Journal of Financial and Quantitative Analysis 58, No. 3 (May 2023): 1111-1143.

Can Gambling Increase Savings? Empircal Evidence on Prize-linked Savings Accounts, with Shawn Cole and Peter Tufano, Management Science 68, No. 5 (May 2022): 3282-3308.
Online Appendix

Sizing Up Corporate Restructuring in the COVID Crisis, with Robin Greenwood and David Thesmar, Brookings Papers on Economic Activity, Fall 2020 (Special Edition): 391-428.
Online Appendix

Estimating the Need for Additional Bankruptcy Judges in Light of the COVID-19 Pandemic, with Jared Ellias and Mark Roe, 11 Harvard Business Law Review (Online Issue) 1 (2021).

Bankruptcy Spillovers, with Shai Bernstein, Emanuele Colonnelli, and Xavier Giroud, Journal of Financial Economics 133, No. 3 (September 2019): 608-633.
Online Appendix

Asset Allocation in Bankruptcy, with Shai Bernstein and Emanuele Colonnelli, Journal of Finance 74, No. 1 (February 2019): 5-53 (Lead Article).
Online Appendix

Get in Line: Chapter 11 Restructuring in Crowded Bankruptcy Courts, Management Science 64, Issue 11 (November 2018): 4967-5460.
Online Appendix

The Ownership and Trading of Debt Claims in Chapter 11 Restructurings, with Victoria Ivashina and David Smith, Journal of Financial Economics 119, Issue 2 (February 2016): 316-335.
Online Appendix

  • Winner of Jensen Prize for Best Paper in Corporate Finance and Organizations (Second Prize)
Subprime Foreclosures and the 2005 Bankruptcy Reform, with Donald Morgan and Matthew Botsch, Federal Reserve Bank of New York Economic Policy Review 18, No. 1 (March 2012): 47-57.