Full Citation

Title: The Role of Human Capital in Corporate Bankruptcy

Citation Type: Miscellaneous

Publication Year: 2009

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Abstract: Using a sample of 1,493 public firms that filed for Chapter 11 between 1980 and 2003, Iexamine how the process of corporate bankruptcy varies by human capital intensity. I documenttwo key patterns. First, human-capital-intensive firms increase their leverage moresharply prior to bankruptcy compared with low-human-capital firms, using borrowing to financefirm growth instead of undertaking typical restructuring activities. In conjunction withtheir increased borrowing, human-capital-intensive firms postpone bankruptcy longer after initialcashflow shortfalls, but file more quickly after suffering shocks to fundamentals. Second,human-capital-intensive firms are more likely to be liquidated within bankruptcy and performbetter conditional upon emergence. Thus, concerns that Chapter 11 allows too many inefficientfirms to emerge may be less applicable to human-capital-intensive firms.

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Authors: Wang, Jialan

Publisher: Massachusetts Instittue of Technology

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

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