IDEAS home Printed from https://ideas.repec.org/p/yca/wpaper/2002_12.html
   My bibliography  Save this paper

Union Contracts and the Firm's Financial Structure

Author

Listed:
  • Elie Appelbaum

    (Department of Economics, York University)

Abstract

This paper examines the effects of union contracts on the firm’s capital structure. We consider one-stage and two-stage models, as well as wage and wage/employment contracts. We show that, for all Pareto efficient bargaining solutions, a higher debt reduces the expected tax bill, but increases the expected cost of labour contracts. This trade-off determines the optimal capital structure. We also show that a stronger union tends to increase the amount of equity used.

Suggested Citation

  • Elie Appelbaum, 2002. "Union Contracts and the Firm's Financial Structure," Working Papers 2002_12, York University, Department of Economics.
    • Handle: RePEc:yca:wpaper:2002_12
    as

    Download full text from publisher

    File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/2002/elie-2002-union.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Svejnar, Jan, 1986. "Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry," Econometrica, Econometric Society, vol. 54(5), pages 1055-1078, September.
    2. Appelbaum, Elie, 1992. "Bankruptcy, Warranties and the Firm's Capital Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 399-412, May.
    3. Darrough, Masako N & Stoughton, Neal M, 1986. "Moral Hazard and Adverse Selection: The Question of Financial Structure," Journal of Finance, American Finance Association, vol. 41(2), pages 501-513, June.
    4. Harris, Milton & Raviv, Artur, 1985. "A Sequential Signalling Model of Convertible Debt Call Policy," Journal of Finance, American Finance Association, vol. 40(5), pages 1263-1281, December.
    5. Cooper, Ian & Franks, Julian R, 1983. "The Interaction of Financing and Investment Decisions When the Firm Has Unused Tax Credits," Journal of Finance, American Finance Association, vol. 38(2), pages 571-583, May.
    6. Appelbaum, Elie & Katz, Eliakim, 1986. "Measures of Risk Aversion and Comparative Statics of Industry Equilibrium," American Economic Review, American Economic Association, vol. 76(3), pages 524-529, June.
    7. Appelbaum, Elie, 1993. "Government policy and the firm's capital structure," European Economic Review, Elsevier, vol. 37(6), pages 1185-1196, August.
    8. Brander, James A & Spencer, Barbara J, 1989. "Moral Hazard and Limited Liability: Implications for the Theory of the Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 833-849, November.
    9. E. Appelbaum & E. Katz, 1987. "Asymmetric Taxation and the Theory of the Competitive Firm under Uncertainty," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 357-369, May.
    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


    Cited by:

    1. Appelbaum, Elie, 1992. "Bankruptcy, Warranties and the Firm's Capital Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 399-412, May.
    2. E. Appelbaum & E. Katz, 1987. "Asymmetric Taxation and the Theory of the Competitive Firm under Uncertainty," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 357-369, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elie Appelbaum, 2007. "Incomplete Contracts, Bankruptcy and the Firm’s Capital Structure," Working Papers 2007_06, York University, Department of Economics.
    2. Appelbaum, Elie & Katz, Eliakim, 1996. "Corporate taxation, incumbency advantage and entry," European Economic Review, Elsevier, vol. 40(9), pages 1817-1828, December.
    3. Elie Appelbaum, 2004. "Union militancy and the probability of strikes," Working Papers 2004_4, York University, Department of Economics.
    4. Swati Basu & Saul Estrin & Jan Svejnar, 2005. "Employment Determination in Enterprises under Communism and in Transition: Evidence from Central Europe," ILR Review, Cornell University, ILR School, vol. 58(3), pages 353-369, April.
    5. Antonio J. Morales & Javier Rodero-Cosano, 2023. "Forward induction and market entry with an endogenous outside option," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(2), pages 365-383, August.
    6. Peter J. Luke & Mark E. Schaffer, 1999. "Wage Determination in Russia: An Econometric Investigation," CERT Discussion Papers 9908, Centre for Economic Reform and Transformation, Heriot Watt University.
    7. Eric Levin & Thomas Moutos, 1991. "Unemployment insurance and union bargaining — an insider-outsider approach," Journal of Economics, Springer, vol. 53(3), pages 271-284, October.
    8. Bruno Biais & Christophe Bisiere & Jean-Paul Decamps, 2000. "A Structural Econometric Investigation of the Agency Theory of Financial Structure," Econometric Society World Congress 2000 Contributed Papers 0817, Econometric Society.
    9. Cherchye, L. & Post, G.T., 2001. "Methodological Advances in Dea," ERIM Report Series Research in Management ERS-2001-53-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    10. Appelbaum, Elie & Lim, Chin, 1982. "Long-run industry equilibrium with uncertainty," Economics Letters, Elsevier, vol. 9(2), pages 139-145.
    11. Piccolo, Salvatore, 2011. "A note on free entry under uncertainty: The role of asymmetric information," Economics Letters, Elsevier, vol. 111(3), pages 256-259, June.
    12. Appelbaum, Elie, 1992. "Bankruptcy, Warranties and the Firm's Capital Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 399-412, May.
    13. Mansaray, Alhassan & Coleman, Simeon & Ataullah, Ali & Sirichand, Kavita, 2021. "Residual government ownership in public-private partnership projects," Journal of Government and Economics, Elsevier, vol. 4(C).
    14. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
    15. Mathews, Richmond D., 2006. "Strategic alliances, equity stakes, and entry deterrence," Journal of Financial Economics, Elsevier, vol. 80(1), pages 35-79, April.
    16. Asplund, Marcus, 2002. "Risk-averse firms in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 995-1012, September.
    17. Asquith, Paul, 1948-, 1992. "Convertible debt--a dynamic test of call policy," Working papers 3413-92., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    18. Biing‐Shiunn Yang & Chao‐Cheng Mai, 2009. "Löschian competition under demand uncertainty," Papers in Regional Science, Wiley Blackwell, vol. 88(4), pages 765-784, November.
    19. Marco de Pinto & Laszlo Goerke, 2020. "Welfare‐enhancing Trade Unions in an Oligopoly with Excessive Entry," Manchester School, University of Manchester, vol. 88(1), pages 60-90, January.
    20. Gupta, Nandini & Ham, Jhon C. & Svejnar, Jan, 2008. "Priorities and sequencing in privatization: Evidence from Czech firm panel data," European Economic Review, Elsevier, vol. 52(2), pages 183-208, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:yca:wpaper:2002_12. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Support (email available below). General contact details of provider: https://edirc.repec.org/data/dyorkca.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.