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Corporate Leverage and Employees’ Rights in Bankruptcy

Andrew Ellul and Marco Pagano ()
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Andrew Ellul: Kelley School of Business Indiana University, CSEF, ECGI and CEPR

No 1706, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: Corporate leverage responds differently to employees’ rights in bankruptcy depending on whether it is driven by strategic concerns in wage bargaining or by credit constraints. Using novel data on employees’ rights in bankruptcy, we estimate their impact on leverage, exploiting time-series, cross-country and firm-level variation in the data. For financially unconstrained firms, results accord with the strategic debt model: leverage increases more in response to rises in corporate property values or profitability if employees have strong seniority in liquidation and weak rights in restructuring. Instead, in financially constrained firms leverage responds less to these shocks if employees have stronger seniority.

New Economics Papers: this item is included in nep-law
Date: 2017, Revised 2019-02
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Related works:
Journal Article: Corporate leverage and employees’ rights in bankruptcy (2019) Downloads
Working Paper: Corporate Leverage and Employees’ Rights in Bankruptcy (2019) Downloads
Working Paper: Corporate Leverage and Employees' Rights in Bankruptcy (2017) Downloads
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