Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
960683 | Journal of Financial Intermediation | 2013 | 18 Pages |
Abstract
Because bankruptcy is costly for employees, theoretical studies argue that firms with higher leverage have to pay their employees higher wages. In this paper we empirically test this prediction. We find that firm leverage is positively related to the wages of employees, both in the United States and in the Netherlands. In the United States, the positive relation between wages and leverage is strongest in the 21st century, which is a period that also shows a positive relation between wages and unemployment rates. We conclude that the human capital costs of bankruptcy are an important disadvantage of debt.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Strategy and Management
Authors
Ali C. Akyol, Patrick Verwijmeren,