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Right-to-Work Laws and Financial Leverage

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  • Dalia Marciukaityte

Abstract

type="main"> High leverage can be used to improve a firm's bargaining position with unions. I find that this use of leverage in the United States is concentrated in states without right-to-work (RTW) laws. The use of high leverage by unionized firms in these states is associated with high market-to-book ratios and is more likely when shareholder and manager interests are aligned through compensation contracts. I confirm these findings by examining the adoption of RTW laws in Oklahoma, as well as presidential and congressional elections. Moreover, I confirm the importance of RTW laws using cash balances instead of leverage.

Suggested Citation

  • Dalia Marciukaityte, 2015. "Right-to-Work Laws and Financial Leverage," Financial Management, Financial Management Association International, vol. 44(1), pages 147-175, March.
    • Handle: RePEc:bla:finmgt:v:44:y:2015:i:1:p:147-175
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