We offer a unified framework to analyze the determination of employment, employee effort, wages, profit-sharing and capital structure when firms face stochastic revenue shocks. We apply a generalized Nash bargaining solution, which extends the wage bargaining literature by incorporating...

In this paper, I examine the strategic role of debt structure in improving the bargaining position of a firm's management relative to its non-financial stakeholders. Debt structure is essential for strategic bargaining because it affects the ease of renegotiating debt contracts and thus the...

This paper exploits inter-temporal variations in employment protection across countries and finds that rigidities in labor markets are an important determinant of firms' capital structure decisions. Over the 1985-2007 period, we find that reforms increasing employment protection are associated...

While previous literature documents weak effects of unionization on payout policy on average, we find that this average relationship hides significant heterogeneous effects of unionization on payouts across firms that depend on firm profitability. The effect of unionization on payouts is...

We examine the empirical relation between labor unions and firm indebtedness in the contemporary United States. Our identification strategy exploits two negative exogenous shocks in union power and the threat of unionization. Further, in the context of panel regressions, we develop a novel...

This paper identifies an externality of a firm's unionization that affects the capital structure decisions of other, non-unionized firms within a local labor market. We find that union victory in a firm leads non-unionized firms to increase their market leverage ratio by 0.9 to 1.3 percentage...

An important gap exists in modern finance theory on the impact of labour market frictions on corporate debt policy. Unemployment risk is a considerable issue for workers but despite this, workers' unemployment costs are largely absent from corporate financial theories which typically do not...

We examine firm and industry characteristics associated with outsourcing and the relation between outsourcing and capital structure using a unique database of purchase contracts for a measure of firm outsourcing. We document firm, industry, and supplier characteristics that are significantly...

I exploit the variation in labor market programs in Spain to show that the use of more flexible (shorter and cheaper-to-fire) employment contracts increases a firm's debt capacity by reducing its operating leverage and probability of default. I use specific institutional features to separate...

In this study, we investigate the role of national culture in firms' choice between bank debt and public debt. We postulate that culture influences corporate debt choice through five channels. Using a new international dataset on debt structure and a large sample of firms from 30 countries, we...