Working Paper: CEPR ID: DP14383
Authors: Ramin Baghai; Rui Silva; Vikrant Vig; Viktor Thell
Abstract: The importance of skilled labor and the inalienability of human capital expose firms to the risk of losing talent in critical times. Using Swedish micro-data, we document that firms lose workers with the highest cognitive and noncognitive skills as they approach bankruptcy. In a quasi-experiment, we confirm that financial distress is driving these results: following a negative export shock caused by exogenous currency movements, talent abandons the firm, but only if the exporter is highly leveraged. Consistent with talent dependence being associated with higher labor costs of financial distress, firms that rely more on talent have more conservative capital structures.
Keywords: bankruptcy; financial distress; employees; talent; capital structure
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Financial distress (G33) | Loss of talent (J63) |
| Financial distress (G33) | Increased turnover among skilled employees (J63) |
| Financial distress (G33) | Talent abandonment (J63) |
| Financial distress (G33) | Loss of talent driven by financial distress rather than economic distress (D29) |
| Talent dependence on capital structure (D29) | Conservative capital structures (G32) |