Capital Structure as a Strategic Variable: Evidence from Collective Bargaining
I analyze the strategic use of debt financing to improve a firm's bargaining position with an important supplier-organized labor. Because maintaining high levels of corporate liquidity can encourage workers to raise their wage demands, a firm with external finance constraints has an incentive to use the cash flow demands of debt service to improve its bargaining position with workers. Using both firm-level collective bargaining coverage and state changes in labor laws to identify changes in union bargaining power, I show that strategic incentives from union bargaining appear to have a substantial impact on corporate financing decisions. Copyright (c) 2010 The American Finance Association.
Year of publication: |
2010
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Authors: | MATSA, DAVID A. |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 65.2010, 3, p. 1197-1232
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Publisher: |
American Finance Association - AFA |
Saved in:
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