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Jared A. Ellias, Employee Bankruptcy Trauma (Harvard Law Sch. John M. Olin Ctr. for Law, Econ. & Bus., Discussion Paper Nos. 1102-1107, 2023).

Abstract: Bankruptcy filings are thought to be traumatic events that demoralize workers and spark employee flight. Using social media data, I present evidence suggesting that this belief is both accurate and, to a large extent, overstated. Online employee reviews show that employees of distressed firms are much more likely to complain about corporate culture and the firm’s financial struggles after their employer files for Chapter 11. This may translate into real action, as I also observe a sharp increase in employee departures immediately following the bankruptcy filing. However, viewed in fuller context, these departures are best described as a continuation of a steady rise in employee attrition that began, on average, a year prior to bankruptcy, suggesting that workforce response to Chapter 11 filings is more a story of continued flight from a distressed employer than an abrupt shift following a federal bankruptcy filing.