Journal article
Labor Protection and Leverage
The Review of financial studies, v 28(2), pp 561-591
01 Feb 2015
Abstract
This paper exploits intertemporal variations in employment protection across countries and finds that rigidities in labor markets are an important determinant of firms' capital structure decisions. Over the 1985-2007 period, we find that reforms increasing employment protection are associated with a 187 basis point reduction in leverage. We interpret this finding to suggest that employment protection increases operating leverage, crowding out financial leverage. This result does not appear to be due to pretreatment differences between treated and control firms, omitted variables, unobserved changes in regional economic conditions, and reverse causality. Heterogeneous treatment effects are consistent with our economic intuition.
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Details
- Title
- Labor Protection and Leverage
- Creators
- Elena Simintzi - University of British ColumbiaVikrant Vig - London Business SchoolPaolo Volpin - City, University of London
- Publication Details
- The Review of financial studies, v 28(2), pp 561-591
- Publisher
- Oxford Univ Press
- Number of pages
- 31
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Web of Science ID
- WOS:000350115500007
- Scopus ID
- 2-s2.0-84924588166
- Other Identifier
- 991021861862204721
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics