46 Pages Posted: 21 Nov 2017 Last revised: 29 Jan 2020
Date Written: January 28, 2020
Using state-level generosity of US consumer bankruptcy laws, this paper documents corporate implications of gains in workforce financial well-being. First, I show that more generous consumer bankruptcy laws reduce absences due to illness and increase labor productivity and firm profitability. Second, I find that firms issue more debt in response to these policies protecting individuals' wealth in personal bankruptcy. This effect is stronger for firms in industries with higher labor turnover and mobility and more labor-intensive firms. Overall, my findings suggest that consumer bankruptcy laws targeting individuals have important spillover effects on corporate performance and borrowing capacity.
Keywords: bankruptcy, household and corporate debt, exemptions, employees
JEL Classification: G32, J21, K35
Suggested Citation: Suggested Citation