Firing Costs and Capital Structure Decisions

• 成果类型: Article
• 署名作者: Serfling, Matthew
• 署名单位: University of Tennessee System; University of Tennessee Knoxville
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12403
• 发表日期: 2016
• 页码: 2239-2285
• 关键词: WRONGFUL-DISCHARGE LAWS; CORPORATE FINANCING DECISIONS; employment protection; PERFORMANCE DECLINES; stock returns; cross-section; leverage; FIRMS; state; RISK

摘要

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.