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Firing Costs and Capital Structure Decisions

SERFLING, MATTHEW

The Journal of finance (New York), 2016-10, Vol.71 (5), p.2239-2286 [Periódico revisado por pares]

Cambridge: Blackwell Publishing Ltd

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  • Título:
    Firing Costs and Capital Structure Decisions
  • Autor: SERFLING, MATTHEW
  • Assuntos: Adoption law ; Capital costs ; Capital structure ; Control variables ; Cost structure ; Earnings ; Employment ; Employment termination ; Financial leverage ; Firings ; Good faith ; Law firms ; Operating leverage ; Studies
  • É parte de: The Journal of finance (New York), 2016-10, Vol.71 (5), p.2239-2286
  • Notas: ark:/67375/WNG-KLV4CHM8-9
    ArticleID:JOFI12403
    istex:74D5C4136F9A0949E5C2DA6AC6C4BE71EE5F4BA7
    Matthew Serfling is from the Department of Finance, University of Tennessee. I thank Michael Roberts (Editor) and three anonymous referees for their helpful comments and guidance. I am also grateful for the helpful suggestions from my dissertation committee members, Sandy Klasa (chair), Kathleen Kahle, Hernán Ortiz‐Molina, Ryan Williams, and Tiemen Woutersen. I would also like to thank Douglas Fairhurst, Hyunseob Kim (discussant), Svetlana Orlova (discussant), Sarah Shaikh, Shweta Srinivasan, conference participants at the 2013 Financial Management Association (FMA) annual meeting and the 2014 American Finance Association (AFA) annual meeting, and seminar participants at the University of Arizona, Georgia Institute of Technology, Georgia State University, the University of Oregon, and the University of Tennessee for helpful comments. An earlier version of this paper was circulated under the title “Labor Adjustment Costs and Capital Structure Decisions.” The author has no relevant or material financial interests that relate to the research described in this paper.
    ObjectType-Article-1
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  • Descrição: I exploit the adoption of state-level labor protection laws as an exogenous increase in employee firing costs to examine how the costs associated with discharging workers affect capital structure decisions. I find that firms reduce debt ratios following the adoption of these laws, with this result stronger for firms that experience larger increases in firing costs. I also document that, following the adoption of these laws, a firm's degree of operating leverage rises, earnings variability increases, and employment becomes more rigid. Overall, these results are consistent with higher firing costs crowding out financial leverage via increasing financial distress costs.
  • Editor: Cambridge: Blackwell Publishing Ltd
  • Idioma: Inglês
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  • Realização: ABCD-USP USP   Logos de Redes Sociais: Freepik

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