Advanced Search
MyIDEAS: Login to save this paper or follow this series

Negotiating with Labor Under Financial Distress

Contents:

Author Info

  • Efraim Benmelech
  • Nittai K. Bergman
  • Ricardo Enriquez

Abstract

We analyze how firms renegotiate labor contracts to extract concessions from labor. While anecdotal evidence suggests that firms tend to renegotiate down wages in times of financial distress, there is no empirical evidence that documents such renegotiation, its determinants, and its magnitude. This paper attempts to fill this gap. Using a unique data set of airlines that includes detailed information on wages and pension plans we document an empirical link between airline financial distress, pension underfunding, and wage concessions.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w17192.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17192.

as in new window
Length:
Date of creation: Jul 2011
Date of revision:
Publication status: published as Benmelech, Efraim, Nittai Bergman and Ricardo Enriquez. 2012. Negotiating with Labor Under Financial Distress. Review of Corporate Finance Studies. 1: 28-67.
Handle: RePEc:nbr:nberwo:17192

Note: CF LS
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Barry T. Hirsch, 1991. "Labor Unions and the Economic Performance of Unions," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, W.E. Upjohn Institute for Employment Research, number luepf.
  2. Klasa, Sandy & Maxwell, William F. & Ortiz-Molina, Hernán, 2009. "The strategic use of corporate cash holdings in collective bargaining with labor unions," Journal of Financial Economics, Elsevier, Elsevier, vol. 92(3), pages 421-442, June.
  3. Barry T. Hirsch & David A. Macpherson, 2003. "Union Membership and Coverage Database from the Current Population Survey: Note," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(2), pages 349-354, January.
  4. Rosett, Joshua G., 1990. "Do union wealth concessions explain takeover premiums? : The evidence on contract wages," Journal of Financial Economics, Elsevier, Elsevier, vol. 27(1), pages 263-282, September.
  5. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 622-41, June.
  6. Asquith, Paul & Gertner, Robert & Scharfstein, David, 1994. "Anatomy of Financial Distress: An Examination of Junk-Bond Issuers," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(3), pages 625-58, August.
  7. Efraim Benmelech & Nittai K. Bergman, 2008. "Liquidation Values and the Credibility of Financial Contract Renegotiation: Evidence from U.S. Airlines," NBER Working Papers 14059, National Bureau of Economic Research, Inc.
  8. Jeffrey R. Brown, 2008. "Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 22(1), pages 177-198, Winter.
  9. Dasgupta, Sudipto & Sengupta, Kunal, 1993. "Sunk Investment, Bargaining and Choice of Capital Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 203-20, February.
  10. Marianne Bertrand, 1999. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," NBER Working Papers 6900, National Bureau of Economic Research, Inc.
  11. Chen, Huafeng Jason & Kacperczyk, Marcin & Ortiz-Molina, Hernán, 2011. "Labor Unions, Operating Flexibility, and the Cost of Equity," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 46(01), pages 25-58, March.
  12. Julian Atanassov & E. Han Kim, 2009. "Labor and Corporate Governance: International Evidence from Restructuring Decisions," Journal of Finance, American Finance Association, American Finance Association, vol. 64(1), pages 341-374, 02.
  13. Bronars, Stephen G & Deere, Donald R, 1991. "The Threat of Unionization, the Use of Debt, and the Preservation of Shareholder Wealth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(1), pages 231-54, February.
  14. Ippolito, Richard A, 1985. "The Economic Function of Underfunded Pension Plans," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 28(3), pages 611-51, October.
  15. Baldwin, Carliss Y, 1983. "Productivity and Labor Unions: An Application of the Theory of Self-Enforcing Contracts," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 56(2), pages 155-85, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2013. "Credit within the Firm," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 211-247.
  2. Tommaso Monacelli & Vincenzo Quadrini & Antonella Trigari, 2011. "Financial Markets and Unemployment," NBER Working Papers 17389, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17192. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.