Do Creditor Rights Increase Employment Risk? Evidence from Loan Covenants

• 成果类型: Article
• 署名作者: Falato, Antonio; Liang, Nellie
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12435
• 发表日期: 2016
• 页码: 2545-2590
• 关键词: regression discontinuity designs; capital structure; corporate governance; performance; LABOR; debt; unionization; COMPETITION; INVESTMENT; impacts

摘要

Using a regression discontinuity design, we provide evidence that there are sharp and substantial employment cuts following loan covenant violations, when creditors gain rights to accelerate, restructure, or terminate a loan. The cuts are larger at firms with higher financing frictions and with weaker employee bargaining power, and during industry and macroeconomic downturns, when employees have fewer job opportunities. Union elections that create new labor bargaining units lead to higher loan spreads, consistent with creditors requiring compensation when employees gain bargaining power. Overall, binding financial contracts have a large impact on employees and are an amplification mechanism of economic downturns.