An employee's annual earnings fall by 10% the year her firm files for bankruptcy and fall by a cumulative present value … liquidated. Compensating wage differentials for this "bankruptcy risk" are approximately 2.3% of firm value for a firm whose … bankruptcy are of sufficient magnitude to be an important consideration in corporate capital structure decisions …

bankruptcy process. We show that the deadweight costs of bankruptcy can be avoided or substantially reduced through no … bankruptcy process to efficiently allow the renegotiation of labor contracts in certain cases. In sharp contrast to the human …-capital-based theories of optimal capital structure in which the renegotiation of labor contract in bankruptcy is a cost associated with …

In this paper, we ask how bankruptcy law affects the financial decisions of corporations and its implications for firm … dynamics. According to current U.S. law, firms have two bankruptcy options: Chapter 7 liquidation and Chapter 11 reorganization … to include both bankruptcy options in a general equilibrium environment. Finally, we evaluate a bankruptcy policy change …