Corporate Reorganization as Labor Insurance in Bankruptcy

77 Pages Posted: 12 Mar 2021 Last revised: 30 Aug 2022

See all articles by Diana Bonfim

Diana Bonfim

Banco de Portugal; Catholic University of Portugal (UCP) - Catolica Lisbon School of Business and Economics

Gil Nogueira

New York University (NYU) - Department of Finance

Date Written: January 7, 2021

Abstract

This paper investigates the consequences of corporate reorganization and liquidation on the reallocation of labor in bankruptcy using a random judge assignment design and reorganization filings from Portugal. Reorganization provides labor insurance to workers in bankruptcy, having a positive and persistent effect on wages, even as most workers leave reorganized firms. Reduced human capital losses and improved worker-firm matches with new employers are two mechanisms that explain the effect of reorganization on wages. The positive effect of reorganization on worker outcomes is concentrated in thin and low-growth labor markets.

Keywords: corporate reorganization, bankruptcy, cost of job loss

JEL Classification: G33, G38, J24, J63, K39,

Suggested Citation

Bonfim, Diana and Nogueira, Gil, Corporate Reorganization as Labor Insurance in Bankruptcy (January 7, 2021). Available at SSRN: https://ssrn.com/abstract=3761746 or http://dx.doi.org/10.2139/ssrn.3761746

Diana Bonfim

Banco de Portugal ( email )

Av Almirante Reis, 71
P-1150-012 Lisboa
Portugal

Catholic University of Portugal (UCP) - Catolica Lisbon School of Business and Economics ( email )

Palma de Cima
Lisbon, 1649-023
Portugal

Gil Nogueira (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
227
Abstract Views
1,336
Rank
203,637
PlumX Metrics