Boarding a Sinking Ship? An Investigation of Job Applications to Distressed Firms

51 Pages Posted: 19 Mar 2012 Last revised: 25 Jan 2013

See all articles by Jennifer Brown

Jennifer Brown

University of Utah - Department of Finance

David A. Matsa

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Date Written: January 24, 2013

Abstract

We use novel data from a leading online job search platform to examine the impact of corporate distress on firms’ ability to attract job applicants. Survey responses suggest that job seekers accurately perceive firms’ financial health, as measured by the companies’ credit default swap prices. Analyzing responses to job postings by major financial firms during the recent financial crisis, we find that an increase in an employer’s distress results in fewer and lower quality applicants. These effects are particularly evident when the social safety net provides workers with weak protection against unemployment and for positions requiring advanced training.

Keywords: labor supply, corporate distress, unemployment risk, employee recruitment, job applications

JEL Classification: G20, G32, G33, J64, M5

Suggested Citation

Brown, Jennifer and Matsa, David A., Boarding a Sinking Ship? An Investigation of Job Applications to Distressed Firms (January 24, 2013). AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2024455 or http://dx.doi.org/10.2139/ssrn.2024455

Jennifer Brown

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

David A. Matsa (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8337 (Phone)
847-491-5719 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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