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Personal bankruptcy costs, union bargaining power, and capital structure

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  • Halford, Joseph T.
  • Hayes, Rachel M.
  • Sibilkov, Valeriy

Abstract

We document that employee bankruptcy costs affect corporate capital structure decisions via their impact on the bargaining power of labor unions. We employ difference-in-differences and triple-difference research designs surrounding a major bankruptcy reform that increased personal bankruptcy costs. Our results suggest that, on average, this reform reduced unions’ bargaining power, resulting in a decrease in the financial leverage of unionized firms relative to nonunionized firms. Our results provide new evidence for a relatively unexplored determinant of capital structure—personal bankruptcy costs.

Suggested Citation

  • Halford, Joseph T. & Hayes, Rachel M. & Sibilkov, Valeriy, 2024. "Personal bankruptcy costs, union bargaining power, and capital structure," Journal of Banking & Finance, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:jbfina:v:168:y:2024:i:c:s0378426624001857
    DOI: 10.1016/j.jbankfin.2024.107271
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    More about this item

    Keywords

    Capital structure; Personal bankruptcy costs; BAPCPA; Union bargaining power;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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