In this paper, we develop a theory of union bargaining power based on firm specific skills acquired by the insider workforce. We show that unions increase the bargaining power of insiders only in states of the world in which the firm would like to retain insiders but not hire outsiders.

In the course of ordinary business, commercial banks frequently encounter entrepreneurs seeking loans for the purpose of financing new or continuing projects. These entrepreneurs are frequently unrealistic, their perception having been biased by wishful thinking. Bankers are left with a...

We examine the employment decisions of Spanish manufacturing firms in financial distress. Our sample comprises 4,566 firms operating during 1983-1994. We find that firms in distress reduce their employment significantly. These reductions are positively associated with asset sales, but cannot be...

Many economists argue that the primary economic function of banks is to provide cheap credit, and to facilitate this function, they advocate the strict protection and enforcement of creditor rights. But banks can serve another important economic function: through project screening they can...

Creditors often share information about their customers' credit records. Besides helping them to spot bad risks, this acts as a disciplinary device. If creditors are known to inform one another of defaults, borrowers must consider that default on one lender would disrupt their credit rating with...