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

The importance of skilled labor and the inalienability human capital expose firms to risk losing talent at critical times. Using Swedish microdata, we document that lose workers with highest cognitive noncognitive skills as they approach bankruptcy. In a quasi-experiment, confirm financial distress drives these results: following negative export shock caused by exogenous currency movements, abandons firm, but only if exporter is highly leveraged. Consistent dependence being associated higher costs distress, rely more on have conservative structures.