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The Role of Government in the Labor–Creditor Relationship: Evidence from the Chrysler Bankruptcy

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  • Blaylock, Bradley
  • Edwards, Alexander
  • Stanfield, Jared

Abstract

We examine the role of government in the labor–creditor relationship using the case of the Chrysler bankruptcy. As a result of the government intervention, firms in more unionized industries experienced lower event-window abnormal bond returns, higher abnormal bond yields, and lower cumulative abnormal bond returns. The results are stronger for firms closer to distress. We also observe the effect in firms in which labor bargaining power is stronger and those with larger pension liabilities. Overall, the results underline the importance of government as a significant force in shaping the agency conflict between creditors and workers.

Suggested Citation

  • Blaylock, Bradley & Edwards, Alexander & Stanfield, Jared, 2015. "The Role of Government in the Labor–Creditor Relationship: Evidence from the Chrysler Bankruptcy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(3), pages 325-348, June.
    • Handle: RePEc:cup:jfinqa:v:50:y:2015:i:03:p:325-348_00
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    Cited by:

    1. Bradley, Daniel & Pantzalis, Christos & Yuan, Xiaojing, 2016. "Policy risk, corporate political strategies, and the cost of debt," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 254-275.
    2. Bradley S. Blaylock & Jimmy F. Downes & Mollie E. Mathis & Scott D. White, 2022. "Do bondholders incorporate expected repatriation taxes into their pricing of debt?," Review of Accounting Studies, Springer, vol. 27(4), pages 1457-1492, December.
    3. Omesh Kini & Mo Shen & Jaideep Shenoy & Venkat Subramaniam, 2022. "Labor Unions and Product Quality Failures," Management Science, INFORMS, vol. 68(7), pages 5403-5440, July.

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