We study the effect of judicial bias favoring firm continuation in bankruptcy on the labor market outcomes of employees by exploiting the random assignment of cases across courts in the State of São Paulo in Brazil. Employees of firms assigned to courts that favor firm continuation are more likely to stay with their employer, but they earn, on average, lower wages three to five years after bankruptcy. We discuss several potential mechanisms that can rationalize this result, and provide evidence that imperfect information about outside options in the local labor market and adjustment costs associated with job change play an important role.

Eine Insolvenz ist nur eine von mehreren möglichen Varianten, wie Unternehmen aus dem Markt austreten können. Viele Unternehmen schließen einfach ohne Insolvenz, wieder andere werden übernommen oder fusionieren. Tatsächlich schließen sehr viel mehr Unternehmen ohne Insolvenz, als Unternehmen eine Insolvenz anmelden (Müller und Stegmaier, 2015). Der Hauptunterschied zwischen den Marktaustrittsformen besteht darin, dass ein Marktaustritt ohne Insolvenz nicht immer ein Scheitern des Unternehmens als Ursache hat und oft freiwillig geschieht.1 Der Marktaustritt über den Weg der Insolvenz ist hingegen ein deutlicher Hinweis auf ökonomisches Scheitern. Marktaustritten ohne Insolvenz geht oft eine mehrjährige geordnete Schrumpfungsphase vorweg, während insolvente Unternehmen sich bis zum Schluss gegen den Austritt stemmen (Fackler et al., 2018). Das Interesse an Insolvenzen ergibt sich zum einen daraus, dass sie ein sehr aktueller und gut messbarer Indikator für ökonomisches Scheitern und Arbeitsplatzverluste sind. Zum anderen bergen massenhafte Insolvenzen die Gefahr von Ansteckungseffekten bis hin zu Bankenkrisen.

Does banking supervision affect borrowers’ transition to the carbon-neutral economy? We use a unique identification strategy that combines the French bank climate pilot exercise with borrowers’ carbon emissions to present two novel findings. First, climate stress tests actively facilitate borrowers’ transition to a low-carbon economy through a lending channel. Stress-tested banks increase loan volumes but simultaneously charge higher interest rates for brown borrowers. Second, additional lending is associated with some improvements in environmental performance. While borrowers commit more to reduce carbon emissions and are more likely to evaluate environmental effects of their projects, they neither reduce direct carbon emissions, nor terminate relationships with environmentally unfriendly suppliers. Our findings establish a causal link between bank climate stress tests and borrowers’ reductions in transition risk.

We examine the effect of sovereign credit impairments on the pricing of syndicated loans following rating downgrades in the borrowing firms' countries of domicile. We find that the sovereign ceiling policies used by credit rating agencies create a disproportionately adverse impact on the bounded firms' borrowing costs relative to other domestic firms following their sovereign's rating downgrade. Rating-based regulatory frictions partially explain our results. On the supply-side, loans carry a higher spread when granted from low-capital banks, non-bank lenders, and banks with high market power. We further document an operating demand-side channel, contingent on borrowers' size, financial constraints, and global diversification. Our results can be attributed to the relative bargaining power between lenders and borrowers: relationship borrowers and non-bank dependent borrowers with alternative financing sources are much less affected.