N°25-34: Skilled Labor Mobility and Bank Default

This study investigates the impact of skilled labor mobility on bank fragility. We construct a novel bank-level measure of skilled labor mobility using job-posting data and show that it significantly increases bank default probability. The effect is driven entirely by demand for risk officers, identifying risk management capacity as the specific mechanism. The effect is amplified by competition and is concentrated among banks experiencing net employee outflows. We further document that legal restrictions on labor mobility weaken the potential detrimental effect. Our findings indicate that skilled labor mobility exacerbates bank fragility, yet targeted policies can bolster resilience against possible adverse effects from labor market frictions.