Talent in Distressed Firms: Investigating the Labor Costs of Financial Distress

Ramin P. Baghai*, Rui C. Silva, Viktor Thell, Vikrant Vig

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

26 Scopus citations


The importance of skilled labor and the inalienability of human capital expose firms to the risk of losing talent at critical times. Using Swedish microdata, 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 drives 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.

Original languageEnglish (US)
Pages (from-to)2907-2961
Number of pages55
JournalJournal of Finance
Issue number6
StatePublished - Dec 2021

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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