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Capital structure and labour demand: further evidence

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  • Holger Gorg
  • Eric Strobl

Abstract

This paper provides further evidence on the relationship between a firm's capital structure and its labour demand. This study estimates dynamic labour demand equations using firm-level panel data for firms in the electronics sector in Ireland for the period 1982 to 1995. These results suggest that labour demand is not affected by a firm's capital structure, proxied by its debt-to-asset ratio. This may give statistical support to the Modigliani-Miller theorem, which conjectures that the market value of a firm is not influenced by its capital structure, implying that a firm's labour demand decision is independent of capital structure.

Suggested Citation

  • Holger Gorg & Eric Strobl, 2001. "Capital structure and labour demand: further evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 8(11), pages 719-723.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:11:p:719-723
    DOI: 10.1080/13504850010029480
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