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Capital Structure as a Strategic Variable: Evidence from Collective Bargaining

The Journal of finance (New York), 2010-06, Vol.65 (3), p.1197-1232 [Peer Reviewed Journal]

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Title:
Capital Structure as a Strategic Variable: Evidence from Collective Bargaining
Author: MATSA, DAVID A.
Subjects: Bargaining power ; Business structures ; Capital structure ; Cash flow ; Collective bargaining ; Corporate debt ; Debt ; Debt financing ; Financial leverage ; Industrial organization ; Industrial unions ; Labor law ; Labour force ; Law firms ; Liquidity ; Right to work law ; Studies ; Wage negotiations
Is Part Of: The Journal of finance (New York), 2010-06, Vol.65 (3), p.1197-1232
Description: 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.
Publisher: Malden, USA: Blackwell Publishing Inc
Language: English
Identifier: ISSN: 0022-1082
EISSN: 1540-6261
DOI: 10.1111/j.1540-6261.2010.01565.x
CODEN: JLFIAN
Source: Alma/SFX Local Collection

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