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Capital structures and compensation policies

Author

Listed:
  • Kais Dachraoui

    (HEC Montreal, Canada Research Chair in Risk Management)

  • Georges Dionne

    (HEC Montreal, Canada Research Chair in Risk Management)

Abstract

We study the interactions between leverage and compensation policies within firms. Recent works have shown that there exists heterogeneity in compensation policies across firms (Abowd, Kramarz and Margolis, 1999, and Margolis, 1996). We introduce firms' capital structure in order to explain part of this heterogeneity. Estimation results show, in fact, that the composition of the labor force affects significantly firms' leverage which in turn affects the compensation policy of age reduce the estimated trade-off between starting compensations and returns to seniority. These results support strong interactions between the financial market and the labor market explained by asymmetrical information in both markets.

Suggested Citation

  • Kais Dachraoui & Georges Dionne, 2001. "Capital structures and compensation policies," Working Papers 99-3, HEC Montreal, Canada Research Chair in Risk Management.
    • Handle: RePEc:ris:crcrmw:1999_003
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    Cited by:

    1. is not listed on IDEAS
    2. Dionne, G., 2000. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud," Ecole des Hautes Etudes Commerciales de Montreal- 00-04, Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques..
    3. Georges Dionne, 1998. "La mesure empirique des problèmes d’information," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(4), pages 585-606.

    More about this item

    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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