The Labour Effect of Pro-Labour Bias of Bankruptcy

Seminar abstract

Judicial decisions in bankruptcy are often influenced by the goal of preserving employment in financially distressed firms.

What are the effects of these pro-labour decisions on workers' earnings and employment trajectories?

We construct a new court-level measure of pro-labour bias based on the text of judicial decisions, and exploit the random assignment of cases to courts within judicial districts in the state of São Paulo in Brazil to study the effect of pro-labour bias on labour market outcomes.

We find that workers of firms assigned to high pro-labour courts experience 4.4 percent lower post-bankruptcy earnings.

This negative effect is primarily driven by wage adjustment rather than probability of employment, and it is persistent in the five-year period after bankruptcy.

This presentation discusses several mechanisms that can drive this result.

Booking

This seminar is free to attend. We welcome you to join with your friends, colleagues and classmates.

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Speaker bio

Margarita Tsoutsoura is an associate professor and Smith Family Business Professor of Finance at the Samuel Curtis Johnson Graduate School of Management of Cornell University.

She is also Faculty Research Fellow at the NBER Corporate Finance Program and Research Fellow at the Center for Economic and Policy Research. Most recently,

Tsoutsoura was also associate professor of finance at the Booth School of Business, University of Chicago.

Professor Tsoutsoura has several research projects studying family firms and privately held firms.

Her most recent project studies the effect of mandated pay transparency on the gender pay gap.

She is also interested in corporate governance as well as the effects of corruption and tax evasion.

She is Associate Editor at Management Science and the Review of Economics and Statistics.

Her work has been published in the Quarterly Journal of Economics, Journal of Finance, Journal of Financial Economics, and Review of Financial Studies.