Full Citation

Title: Zero leverage puzzle: Do labour laws matter?

Citation Type: Journal Article

Publication Year: 2022

ISBN:

ISSN: 1468-036X

DOI: 10.1111/EUFM.12385

NSFID:

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Abstract: Exploiting the staggered passage of labour protection laws in the United States, we find that higher labour adjustment costs increased the likelihood of observing zero leverage firms by 22%. This effect is significantly larger in states with stronger unionization, in industries with higher volatility and concentration, and in firms with higher labour intensity. Both within-firm changes in debt policies and higher propensity of newer firms to be debt-free are important in explaining these patterns. Overall, our work contributes to the literature on the relation between financial and labour markets by highlighting the role of labour laws in explaining the zero-leverage puzzle.

Url: https://onlinelibrary-wiley-com.ezp3.lib.umn.edu/doi/full/10.1111/eufm.12385

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Authors: Boustanifar, Hamid; Verriest, Arnt

Periodical (Full): European Financial Management

Issue:

Volume:

Pages: 1-41

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

Countries: