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

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  • JENNIFER BROWN
  • DAVID A. MATSA

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 condition, as measured by companies’ credit default swap prices and accounting data. Analyzing responses to job postings by major financial firms during the Great Recession, 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 a college education.
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Suggested Citation

  • Jennifer Brown & David A. Matsa, 2016. "Boarding a Sinking Ship? An Investigation of Job Applications to Distressed Firms," Journal of Finance, American Finance Association, vol. 71(2), pages 507-550, April.
    • Handle: RePEc:bla:jfinan:v:71:y:2016:i:2:p:507-550
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    File URL: http://hdl.handle.net/10.1111/jofi.2016.71.issue-2
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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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