Results 1 - 10 of 40

Common errors: How to (and not to) control for unobserved heterogeneity,

by Todd A Gormley , David A Matsa , Michael Anderson , Joshua Angrist , Xavier Giroud , Christian Hansen , Dirk Jenter , Sandy Klasa , Jonathan Lewellen , Alexander Ljungqvist , Mitchell Petersen , Nagpurnanand R Prabhala , Michael Roberts , Nick Souleles , Michael R Wagner , Toni Whited , Jeffrey Wooldridge - Review of Financial Studies , 2014
"... Abstract Controlling for unobserved heterogeneity (or "common errors"), such as industry-specific shocks, is a fundamental challenge in empirical research. This paper discusses the limitations of two approaches widely used in corporate finance and asset pricing research: demeaning the dep ..."
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Abstract Controlling for unobserved heterogeneity (or "common errors"), such as industry-specific shocks, is a fundamental challenge in empirical research. This paper discusses the limitations of two approaches widely used in corporate finance and asset pricing research: demeaning the dependent variable with respect to the group (e.g., "industry-adjusting") and adding the mean of the group's dependent variable as a control. We show that these methods produce inconsistent estimates and can distort inference. In contrast, the fixed effects estimator is consistent and should be used instead. We also explain how to estimate the fixed effects model when traditional methods are computationally infeasible. (JEL G12, G2, G3, C01, C13)

Negotiating with Labor under Financial Distress ∗

by Efraim Benmelech, Nittai K. Bergman, Ricardo Enriquez, We Thank Rene Adams, Ulf Axelson, David Autor, Richard Freeman, Luigi Guiso, Marcin Kacperczyk, Steve Kaplan, Larry Katz, Borja Larrain, Christian Leuz, Marco Pagano, Nancy Qian, Jeremy Stein, Michael Weisbach, Toni Whited
"... 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 ..."
Abstract - Cited by 16 (0 self) - Add to MetaCart
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 The setting of wages and their renegotiation are crucial in determining labor outcomes. At the

Boarding a Sinking Ship? An Investigation of Job Applications to Distressed Firms *

by Jennifer Brown, David A. Matsa, Danielle Li, Brian Melzer, Dylan Minor, Josh Rauh, Antoinette Schoar, Aaron Sojourner , 2012
"... This paper examines the impact of corporate distress on firms ’ ability to attract job applicants. Using novel data from a leading online job search platform, we find that firms ’ financial health affects job seekers ’ perceptions and behavior. First, using survey responses, we find that job seekers ..."
Abstract - Cited by 8 (3 self) - Add to MetaCart
This paper examines the impact of corporate distress on firms ’ ability to attract job applicants. Using novel data from a leading online job search platform, we find that firms ’ financial health affects job seekers ’ perceptions and behavior. First, using survey responses, we find that job seekers accurately perceive firms’ financial health, as measured by the companies ’ credit default swap prices and other proxies. Second, analyzing responses to job postings by major financial firms during the recent financial crisis, we find that these perceptions affect job seekers ’ application decisions. An increase in an employer’s distress results in fewer and lower quality applicants for job openings at the firm. We find a decline in applications even when comparing applications to the exact same positions before and after entering distress. These effects are particularly evident in locations where the social safety net provides workers with weaker protections against unemployment and for positions requiring advanced training.

relationships

by Christian Th. Klein A, Norbert Kaiblinger B, Peter Wolschann A , 2001
"... A new type of 3D-QSAR descriptors is introduced. For each molecule under consideration an internal coordinate system is defined relative to molecular points, such as positions of atoms in the molecule or centers of mass or certain substructures. From the origin of this system distances to the solven ..."
Abstract - Cited by 4 (0 self) - Add to MetaCart
A new type of 3D-QSAR descriptors is introduced. For each molecule under consideration an internal coordinate system is defined relative to molecular points, such as positions of atoms in the molecule or centers of mass or certain substructures. From the origin of this system distances to the solvent accessible surface are calculated at defined spherical coordinate angles, θ and ϕ. The distances represent steric features, while the molecular electrostatic potentials at the intersection points with the surface represent the electrostatic contributions. The approach is called IDA (internal distances analysis). Matrices obtained by varying the spherical coordinate angles by fixed increments are correlated with the biological activity by partial least squares (PLS). The descriptors, tested with the benchmark steroids and an also well characterized benzodiazepine data set, turn out to be highly predictive. Additionally, they share the advantage of grid-based methods that the obtained models can be visualized, and thus be directly used in a rational drug design approach.

Labor and Capital: Is Debt a Bargaining Tool?

by Elena Simintzi, Vikrant Vig, Paolo Volpin, Francesca Cornelli, David Dorn, Andrea Eisfeldt, Oliver Hart, Christopher Hennessy, On Julio, David Matsa, Enrico Perotti, Gordon Phillips, Antoinette Schoar, Amit Seru, Ilya Strebulaev , 2009
"... This paper uses …rm-level data from 21 countries over the 1985-2004 period to examine the e¤ect of labor regulation on the equilibrium choice of debt by …rms. We …nd that increases in labor protection are associated with decreases in the use of debt by …rms. We interpret this result as evidence that ..."
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This paper uses …rm-level data from 21 countries over the 1985-2004 period to examine the e¤ect of labor regulation on the equilibrium choice of debt by …rms. We …nd that increases in labor protection are associated with decreases in the use of debt by …rms. We interpret this result as evidence that operating leverage (in the form of higher labor costs) crowds out …nancial leverage. Furthermore, we …nd that the e¤ect of employment protection is more pronounced for …rms that rely more on labor and have lower liquidation value, and in countries where bargaining is more decentralized. Our results are robust to changes in empirical speci…cations, including di¤erent de…nitions of leverage and a di¤erences-in-di¤erences approach that exploits inter-temporal variations in labor laws across countries.
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How Do Pensions Affect Corporate Capital Structure Decisions?

by Anil Shivdasani , Irina Stefanescu , Nina Baranchuk , Jennifer Conrad , Paolo Fulghieri , Eitan Goldman , David Guilkey , Matthias Kahl , Wayne Landsman , Ron Masulis , Mitchell Petersen , Jorg Rocholl , James Schallheim , Merih Sevilir , Doug Shackelford , Sheri Tice , Josef Zechner , William , Mary , Indiana, Norwegian Hec Paris
"... Abstract This paper examines the capital structure implications of defined benefit corporate pension plans. The magnitude of the liabilities arising from these pension plans is substantial. We show that leverage ratios for firms with pension plans are about 35% higher when pension assets and liabil ..."
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Abstract This paper examines the capital structure implications of defined benefit corporate pension plans. The magnitude of the liabilities arising from these pension plans is substantial. We show that leverage ratios for firms with pension plans are about 35% higher when pension assets and liabilities are incorporated into the capital structure. We estimate that the tax shields from pension contributions are about a third of those from interest payments. Pension contributions have a modest effect in lowering firms' marginal corporate tax rates. Once pensions are considered, firms are less conservative in their choice of leverage than has been previously thought. We show that firms incorporate the magnitude of their pension assets and liabilities into their capital structure decisions.
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Financial Markets and Unemployment ∗

by Tommaso Monacelli, Università Bocconi, Vincenzo Quadrini, Antonella Trigari, Università Bocconi, We Wouter, Den Haan, John Haltiwanger, Nicolas Petrosky-nadeau For , 2011
"... We study the importance of financial markets for (un)employment fluctuations in a model with searching and matching frictions where firms issue debt under limited enforcement. Higher debt allows employers to bargain lower wages which in turn increases the incentive to create jobs. The transmission m ..."
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We study the importance of financial markets for (un)employment fluctuations in a model with searching and matching frictions where firms issue debt under limited enforcement. Higher debt allows employers to bargain lower wages which in turn increases the incentive to create jobs. The transmission mechanism of ‘credit shocks ’ is fundamentally different from the typical credit channel and the model can explain why firms cut hiring after a credit contraction even if they do not have shortage of funds for hiring workers. The empirical relevance of these shocks is validated by the structural estimation of the model. The theoretical predictions are also consistent with the estimation of a structural VAR whose identifying restrictions are derived from the theoretical model.

Managing Human Capital Risk

by Martin C. Schmalz, Thomas Eisenbach, Henry Farber, Edoardo Grillo, Harrison Hong, Bo Honoré, Oleg Itskhoki, Martin Kanz, David Lee, Thomas Mertens, Benjamin Moll, Ulrich Müller, Juan Ortner, José Scheinkman, Hyun Song Shin , 2012
"... Labor adjustment costs make it optimal to retain hard-to-replace employees in bad times, and thus cause an “implicit liability ” to pay their wages. The employees ’ human capital thus behaves like an illiquid asset of the firm that is financed with fixed coupon payments. Firms optimally hold equity- ..."
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Labor adjustment costs make it optimal to retain hard-to-replace employees in bad times, and thus cause an “implicit liability ” to pay their wages. The employees ’ human capital thus behaves like an illiquid asset of the firm that is financed with fixed coupon payments. Firms optimally hold equity-financed cash to insure against the risk of being unable to follow the optimal labor retention policy. I distinguish my model from existing models of the interaction between corporate finance and labor by identifying the corporate finance response to unionization with a regression discontinuity design. Increased labor adjustment costs due to unionization cause higher cash-to-asset ratios and lower net leverage in financially unconstrained firms. Firms that cannot raise cash “save on risk management,” decrease cash-to-assets and increase net leverage.

Providing protection or encouraging holdup? The effects of labor unions on innovation. Working Paper

by Daniel Bradley , Incheol Kim , Xuan Tian , Florian Ederer , Paul Laux , Lily Li , Yan Li , Lalitha Naveen , Oleg Rytchkov , Krishnamurthy Subramanian , 2013
"... Abstract We examine the impact of unionization on the innovation activities of firms by exploiting a novel database of union elections. Firm innovation output, measured by patent counts and citations, declines significantly after firms elect to unionize and increases significantly for firms that vo ..."
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Abstract We examine the impact of unionization on the innovation activities of firms by exploiting a novel database of union elections. Firm innovation output, measured by patent counts and citations, declines significantly after firms elect to unionize and increases significantly for firms that vote to deunionize. To establish causality, we use a regression discontinuity design relying on "locally" exogenous variation in unionization generated by union elections that pass or fail by a small margin of votes. The market reaction to firms that elect to unionize is negatively related to firms' past innovation output. Our evidence suggests unionization stifles innovation.
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The leverage externalities of credit default swaps, Working Paper

by Jay Y. Li, Dragon Yongjun Tang , 2013
"... This paper provides the first empirical evidence of the externalities of credit default swaps (CDS). We find that a firm’s leverage is lower when a larger proportion of its revenue is derived from CDS-referenced customers. This finding is robust to alternative samples and measures, placebo tests, an ..."
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This paper provides the first empirical evidence of the externalities of credit default swaps (CDS). We find that a firm’s leverage is lower when a larger proportion of its revenue is derived from CDS-referenced customers. This finding is robust to alternative samples and measures, placebo tests, and the selection of customers by suppliers. Moreover, firms affected by customer CDS trading issue equity to lower leverage, and their equity issuance costs are lower. These findings are consistent with the view that CDS trading on customers improves the information environment for suppliers. Therefore, while many firms are not directly linked to CDS trading, CDS trading on their customers has spillover effects on these firms ’ financial policies.