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Severance Pay and Corporate Finance: Empirical Evidence from a Panel of Austrian and Italian Firms

Author

Listed:
  • Cardinale, Mirko

    (Watson Wyatt LLP)

  • Orszag, Mike

    (Towers Watson)

Abstract

This paper examines the empirical link between severance pay and corporate finance. Severance pay is an economic debt of the employer and hence should be taken into account by the market in its assessments of risk. Using a hand collected dataset of accounting data from Italy and Austria we find there is only a limited relationship between severance pay and market risk indicators. This suggests that arguments that severance pay systems destroy corporate value may need to be reassessed.

Suggested Citation

  • Cardinale, Mirko & Orszag, Mike, 2004. "Severance Pay and Corporate Finance: Empirical Evidence from a Panel of Austrian and Italian Firms," IZA Discussion Papers 1383, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1383
    as

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    References listed on IDEAS

    as
    1. Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987. "How Does the Market Value Unfunded Pension Liabilities?," NBER Chapters, in: Issues in Pension Economics, pages 81-110, National Bureau of Economic Research, Inc.
    2. Zvi Bodie & John B. Shoven & David A. Wise, 1987. "Issues in Pension Economics," NBER Books, National Bureau of Economic Research, Inc, number bodi87-1, March.
    3. Feldstein, Martin & Seligman, Stephanie, 1981. "Pension Funding, Share Prices, and National Savings," Journal of Finance, American Finance Association, vol. 36(4), pages 801-824, September.
    4. Bodie, Zvi & Shoven, John B. & Wise, David A. (ed.), 1987. "Issues in Pension Economics," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226062846, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Italian employee benefits; severance pay; corporate finance; Austrian employee benefits;
    All these keywords.

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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