The Quick Read
- New research on the Second Chance for Women Entrepreneurs examined more than 180,000 US small-business bankruptcy filings and linked part of the sample to 1.9 million Small Business Administration loan records.
- Female-owned businesses in the study were 24% more likely to file under Chapter 7, which generally involves liquidation, rather than taking the Chapter 11 route, which allows a business to reorganise and continue operating.
- Even among businesses entering Chapter 11, female-owned firms were less likely to receive a discharge and successfully reorganise.
- The researchers found little evidence that women-owned firms entered bankruptcy with systematically worse observable credit quality. In the matched sample, male-owned firms actually showed higher interest rates and worse charge-off outcomes on some measures.
- Court workload appears important. Under high judicial caseloads, female-owned firms were 11–12 percentage points less likely than comparable male-owned firms to receive a Chapter 11 discharge.
- The study concerns the US bankruptcy system and cannot establish that Indian insolvency processes produce the same gender pattern. Its broader lesson is relevant everywhere: an entrepreneurial ecosystem should be judged not only by who is encouraged to start, but also by who can recover, restructure, and try again.
Second Chance for Women Entrepreneurs
Entrepreneurship has developed a strange affection for failure.
Attend enough startup events, and somebody will eventually tell you: Fail fast.
Another person will say failure builds character.
A founder who has survived three unsuccessful ventures may even introduce them as credentials before discussing the fourth. There is wisdom in that.
Businesses fail. Products miss markets. Cash runs out. Customers disappear. Partners disagree. Economic conditions change. Sometimes a perfectly competent entrepreneur builds the wrong business at the wrong moment.
Failure should therefore be survivable. But a new study on the Second Chance for Women Entrepreneurs raises a considerably more interesting question.
When the business that fails belongs to a woman, is the system equally willing to let her try again? The evidence from the United States suggests the answer may be no.
The research followed what happens after things go wrong
Researchers Hosein Maleki, Mahsa Kaviani, Simi Kedia and Shaghayegh Pourvosoughi examined a large dataset of US small-business bankruptcies to understand whether female- and male-owned businesses received different outcomes.
Their dataset covered more than 180,000 small-business bankruptcy filings, including information on filing type, judges, lawyers and case outcomes. They also connected a subset of these businesses to 1.9 million SBA loan records, allowing them to examine the firms’ financial condition before bankruptcy.
The first result is difficult to overlook.
Women-owned businesses were 24% more likely to file under Chapter 7.
For readers unfamiliar with the American bankruptcy system, the difference between Chapters 7 and 11 is crucial.
Chapter 7 generally involves liquidation. Assets are gathered and sold, with proceeds distributed to creditors. Chapter 11 is generally a reorganisation process. A business may continue operating while proposing a plan to address its debts.
One path is much closer to the end of the business. The other can offer a road back.
Women-owned firms in the study were more likely to find themselves on the first road.
And entering Chapter 11 did not erase the gap
Perhaps women-owned companies chose liquidation because their businesses were simply weaker. That would be an obvious explanation. The researchers tested it.
They found little evidence that female-owned businesses were systematically worse than comparable male-owned firms on observable pre-bankruptcy credit-risk measures. Women-owned firms tended to borrow less, which the researchers say is consistent with longstanding financing constraints. Still, they did not appear materially weaker on measures such as loan pricing or charge-offs.
In the matched sample of businesses that eventually entered bankruptcy, some observable indicators actually looked worse among the male-owned businesses.
And even when women-owned firms entered Chapter 11, the difference persisted. They were less likely to obtain the discharge associated with a successful reorganisation.
So the disadvantage appeared at two moments: fewer women-owned firms entered the pathway offering a chance to reorganise; and those that did were less likely to emerge successfully from it.
That is where the idea of a second chance becomes much more than motivational language.
Then the researchers looked at busy courts
One of the strongest findings concerned judicial workload. When judges carried heavier caseloads, the gender gap widened.
Female-owned businesses assigned to high-caseload judges were around 11 to 12 percentage points less likely than comparable male-owned businesses to receive a Chapter 11 discharge.
The researchers went further. They examined unexpected events, such as judicial deaths, departures, and early retirements, that increased the workload of the judges who remained.
Following those workload shocks, female-owned firms became around 7.5 to 8.8 percentage points less likely to receive a discharge over the following two years. That finding makes the study particularly interesting.
The researchers did not find that female judges simply eliminated the difference. Nor did generally more lenient judges appear to remove it.
Pressure itself seems important.
Their interpretation points towards limited attention: overloaded decision-makers may have less capacity for detailed individual assessment and rely more heavily on shortcuts or coarse signals. The evidence is consistent with gender becoming consequential under those conditions, although the study does not establish that judges engaged in conscious discrimination.
There is a workplace parallel here.
Bias does not always grow stronger just because someone suddenly becomes more prejudiced.
Sometimes systems become less fair when people are tired, rushed, overloaded or operating with incomplete information.
Women appear to notice the environment too
There is another revealing behaviour in the data.
Women were more likely to choose Chapter 7 in districts with more congested courts and where prior outcomes for female-owned businesses had been worse. That can easily be misread as women being less willing to take risks.
The researchers offer another interpretation.
If the route towards reorganisation appears expensive, slow and less likely to work for you, choosing liquidation may be entirely rational.
Experienced lawyers helped somewhat. Women represented by more experienced attorneys were less likely to avoid Chapter 11 in the first place. But experienced legal counsel did not eliminate the gender gap once female-owned businesses were inside Chapter 11.
Access to better advice could help women reach the door. It did not guarantee what happened beyond it.
Entrepreneurship spends a lot of time celebrating the first chance
That is where the research becomes relevant beyond bankruptcy law.
Entrepreneurial ecosystems are very good at beginnings: Startup competitions. Founder programmes. Incubators. Seed capital. Pitch days. Entrepreneurship cells. Grants. Accelerators.
Change in Content has also documented the growth of women entrepreneurs driving India’s economic expansion, across biotechnology, finance, beauty, health, digital platforms and rural enterprise. Women are building in many more categories and at many more scales than the familiar startup-founder stereotype suggests.
But not every entrepreneurial story ends in a funding announcement or a successful exit. Businesses close.
The latest Global Entrepreneurship Monitor women’s report offers useful global context. In 2024, 3.4% of women surveyed reported closing a business, compared with 3.8% of men. Women, however, were 47% more likely than men to cite family or personal reasons for closure. Problems obtaining finance were also among the three most common reasons women gave. The report draws on 161,528 adults across 51 countries.
So an ecosystem interested in women’s entrepreneurship has to become interested in the entire cycle: Starting, funding, growing, struggling, closing, recovering, and sometimes starting again.
Failure is rarely only a balance-sheet event
Consider what business failure can actually mean for a small entrepreneur.
- Savings may have disappeared.
- Debt may remain.
- Employees may have lost jobs.
- Family members may have invested money.
- Suppliers may be waiting.
- A credit history may have changed.
- Confidence may have taken a hit.
- Professional relationships may be strained.
- And the founder has to decide whether she has the emotional and financial appetite to do any of it again.
For a woman, some of those consequences may interact with barriers that existed before the business failed.
Change in Content has already examined why larger and more complex business loans can remain difficult for women entrepreneurs. Many women-owned enterprises begin with fewer assets in the founder’s name, smaller formal financial histories or businesses that do not resemble the structures traditional lenders find easiest to assess.
Another of our reports examined research showing that women entrepreneurs face greater difficulty accessing loans, even before a business encounters distress.
Now consider the second venture. A founder who already began with less financial room may return from failure with even less. That is why the second-chance question deserves economic attention.
The reputational cost of failure may not be neutral either
The new bankruptcy study measures institutional outcomes. It does not measure social stigma, investor attitudes or whether somebody’s family tells her never to try entrepreneurship again.
We should therefore resist the temptation to pretend it proves those effects. But outside the study, anyone examining entrepreneurship should ask about them.
- How do investors interpret a failed company on a man’s CV?
- How do they interpret it on a woman’s?
- Is he “battle-tested” while she “couldn’t make it work”?
- Does a failed male founder retain access to founder networks?
- Does a failed female founder?
- When somebody asks for capital the second time, who gets assessed on what was learned and who gets assessed on what went wrong?
- Does family support survive the first business failure equally?
- Does a woman who already fought for permission, time, collateral or credibility have the energy and resources to repeat that negotiation?
Those are research questions, not conclusions. They are worth asking precisely because the culture of entrepreneurship claims to value failure as experience.
If we genuinely believe that, the belief should survive contact with gender.
India should watch this question without importing the US answer
The bankruptcy mechanisms studied here belong specifically to the US legal system. India has its own insolvency framework, financing structures, MSME ecosystem and institutional realities.
We cannot responsibly say that Indian women entrepreneurs face the same bankruptcy-court disadvantage without Indian evidence. What India can learn is what to measure.
India is actively trying to enlarge women-led entrepreneurship. Programmes are addressing access to credit, rural enterprise, startup participation, procurement and financial inclusion. Change in Content’s recent analysis of the Women Entrepreneurs Finance Code pilots also showed why financial institutions increasingly need gender-disaggregated data to understand where women are actually losing access to capital.
The same discipline should eventually apply to distress.
When women-owned MSMEs struggle:
- How early do they seek restructuring?
- Do they receive restructuring advice?
- Are viable businesses being closed because recovery finance cannot be obtained?
- Who gets emergency working capital?
- What happens to a woman’s access to credit after one failed enterprise?
- How many women start another business?
- How long does it take?
- Does the second business receive less capital?
- Which interventions improve recovery?
We currently spend considerably more time counting women who begin businesses than women who rebuild them. That leaves a significant part of entrepreneurship unseen.
A second-time founder may actually be a better founder
Failure can be expensive education. The founder who comes back may know considerably more about cash flow, customer acquisition, pricing, hiring, inventory, debt, partnerships, contracts, tax, timing, and the difference between revenue and money actually sitting in the bank.
She may understand her industry better than somebody entering it for the first time. And she may also have a much sharper instinct for what can kill a business.
From an economic perspective, automatically making it harder for such entrepreneurs to return is wasteful. The objective should never be to rescue every failed business indefinitely.
Some businesses should close. Some ideas do not work.
Creditors have legitimate rights. Markets have to allocate resources.
Second chances should still involve scrutiny. The interesting principle is equivalent scrutiny.
If two founders arrive with comparable business histories, comparable creditworthiness and credible new propositions, the system should not quietly impose a larger penalty on one because the first venture ended badly and she happens to be a woman.
What would a genuine second-chance ecosystem look like?
It would begin before bankruptcy.
- Founders would have access to restructuring advice while rescue is still possible.
- Financial institutions would distinguish temporary distress from structurally non-viable businesses.
- Entrepreneurs would know where to seek credible legal and financial help before the situation becomes terminal.
- Lenders would have frameworks for assessing second-time founders rather than automatically treating previous failure as permanent disqualification.
- Accelerators could include programmes specifically for businesses being rebuilt, not merely companies being launched.
- Founder networks could normalise the difficult conversation around closure.
- And policymakers could collect gender-disaggregated data on restructuring, insolvency outcomes and re-entry into entrepreneurship.
Most importantly, failure would be treated as information.
Sometimes that information says, “Do not finance this business again.“
Sometimes it says, “This founder knows considerably more than she did the first time.“
A good system should be capable of telling the difference.
The Change in Content Perspective: Entrepreneurship Needs an Undo Button
We love the founder who keeps going. Business culture turns that person into mythology.
The rejected founder who pitched again. The company that almost ran out of money. Or the entrepreneur whose first two ideas failed before the third became enormous.
Persistence photographs beautifully after success. It is less glamorous while somebody is actually rebuilding.
The new US research on the second chance for women entrepreneurs asks us to look at that uncomfortable middle.
Female-owned firms in its sample did not, on average, enter bankruptcy with worse credit quality. Yet they were more likely to liquidate. Less likely to succeed through reorganisation. And particularly disadvantaged when institutions were operating under pressure.
That should make entrepreneurship ecosystems curious. Women’s entrepreneurship will never reach its full economic potential if we only focus on helping women get started. Some will fail. And that is business.
The question is what society, finance and institutions do next.
A failed company should be allowed to remain a failed company. A failed company should not automatically turn its founder into a failed entrepreneur. Especially when the evidence suggests we may not be applying that principle equally. A genuinely mature entrepreneurial economy should give talent room to begin.
And when the fundamentals justify it, room to begin again.
Editorial Note and Disclaimer
This DEI Insights article analyses the 2026 working paper When She Fails: Women Entrepreneurs and Gender Gaps in Business Bankruptcy by Hosein Maleki, Mahsa Kaviani, Simi Kedia and Shaghayegh Pourvosoughi. The empirical findings concern US small-business bankruptcy cases and the US bankruptcy system. Change in Content does not assume that equivalent gender gaps exist within India’s insolvency system without India-specific evidence. Questions concerning investor attitudes, social stigma, family support and second-business financing are identified as areas for further study rather than findings of the paper.
This article is intended for editorial and informational purposes and does not constitute legal or financial advice.
Sources
- Harvard Law School Bankruptcy Roundtable — When She Fails: Women Entrepreneurs and Gender Gaps in Business Bankruptcy.
- Original working paper — Maleki, Kaviani, Kedia and Pourvosoughi, 2026.
- US Courts — Bankruptcy Basics: Chapter 7 and Chapter 11.
- Global Entrepreneurship Monitor — 2024/2025 Women’s Entrepreneurship Report.
