Criminals, Bankruptcy, and Cost of Debt

Kasper Regenburg, Morten Nicklas Bigler Seitz*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

251 Downloads (Pure)


We examine whether criminal records of CEOs and rank-and-file employees are associated with firms’ likelihood of bankruptcy, and whether lenders adjust their required cost of debt accordingly. We use a nationwide sample of private firms and criminal registers covering all firm employees. We find that the likelihood of bankruptcy is positively associated with the CEO’s criminal record and the proportion of employees with criminal records. We find some, though less robust, evidence that lenders price a firm’s loan higher when the firm’s CEO has a criminal record and when more of the employees have criminal records. The results suggest that the characteristics of firm employees represent a risk that, to some extent, is priced by lenders.
Original languageEnglish
JournalReview of Accounting Studies
Issue number3
Pages (from-to)1004-1045
Number of pages42
Publication statusPublished - Sept 2021


  • Bankruptcy prediction
  • Criminal records
  • Human capital
  • Cost of debt

Cite this