Outside Purchase Contracts, Human Capital and Firm Capital Structure

S. Katie Moon and Gordon Phillips

No 20579, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the impact of outside purchase contracts on firm risk and firm capital structure. We find that firms with more outside purchase contracts have less risky cash flows. Despite these less risky cash flows, firms with these contracts also have less financial leverage especially when they operate in high value-added industries. Examining firm financing decisions, we document that firms with more outside contracts are more likely to issue private securities. Our results are consistent with firms with more outside purchase contracts using less leverage to decrease the expected costs of financial distress on their explicit and implicit contracting parties.

JEL-codes: G31 G32 L1 L22 L23 L24 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-bec and nep-hrm
Note: CF IO
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Citations: View citations in EconPapers (3)

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