Corporate leverage and the terms of employment: evidence from French small businesses before and during the global crisis

Ramzi Benkraiem, Mondher Bouattour (), Anthony Miloudi () and Ludovic Vigneron
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Mondher Bouattour: LGC - Laboratoire de Gestion et de Cognition - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse, La Rochelle Business School

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Abstract: Despite the particular importance of corporate leverage and human capital for small businesses, little is surprisingly known about the relationship between these two factors for this category of firms. Accordingly, this article tries to fill this gap by investigating the relationship between leverage and human capital examined through the investment in employee-related expenditure. The analysis focuses on a sample of French listed small businesses before and during the recent global crisis. The empirical findings show that leverage serves as a monitoring mechanism of corporate managers prone to over or underinvest in employee-related expenditure to obtain private benefits. Due notably to the availability of debt, this monitoring is more effective before the crisis period, especially for low growth firms. Overall, these results provide support to the theory that leverage has a disciplining role. Simultaneously, they lead to moderate the strength of this role according to the global crisis. Thus, they should provide useful insights for academics, regulators, managers and credit institutions.

Keywords: Corporate leverage; small businesses; employee-related expenditure; global crisis. (search for similar items in EconPapers)
Date: 2017-02-02
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Published in Applied Economics, 2017, 49 (23), pp.2286-2297. ⟨10.1080/00036846.2016.1237755⟩

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Working Paper: Corporate Leverage and the Terms of Employment: Evidence from French Small Businesses before and during the Global Crisis (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01477157

DOI: 10.1080/00036846.2016.1237755

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