Abstract
We examine worker reactions to firms' credit deterioration using anonymized networking activity on LinkedIn. In the weeks immediately following a negative credit event, connection activity increases at affected firms across the credit rating distribution, pointing to costs beyond those originating from bankruptcy. Heightened networking activity is associated with contemporaneous and future departures, especially at highly-rated firms. Other negative events like missed earnings and equity sell recommendations do not trigger similar reactions. Overall, our results indicate that the latent build-up of connections triggered by credit deterioration represents a source of fragility for firms.
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