The effect of labour protection laws on the relationship between leverage and wages
The effect of labour protection laws on the relationship between leverage and wages
Previous research has shown that leverage has a positive effect on wages. Using US state-level labour protection laws as an exogenous shock, we find that the adoption of the law alleviates the effect of leverage on wages. We show that the mitigating effect on the leverage-wag relationship is more pronounced for firms with strong employee bargaining power. Our study highlights the positive role played by labour protection laws in lowering firms’ labour costs and improving their financial flexibility, which complements the literature and advances our understanding of the broad implications of labour protection laws.
Karpuz, Ahmet
e74e4e60-3c90-429f-bcf3-6c7f76330b08
Luo, Di
cc1b0fa7-f630-45dc-ab05-495f9023148f
Xiao, Rongbing
1aea3c58-53f2-44ef-8507-834d7f10473a
Zhao, Huainan
c1914fa7-b5f5-454a-9ef0-a44114ecfe8b
26 November 2022
Karpuz, Ahmet
e74e4e60-3c90-429f-bcf3-6c7f76330b08
Luo, Di
cc1b0fa7-f630-45dc-ab05-495f9023148f
Xiao, Rongbing
1aea3c58-53f2-44ef-8507-834d7f10473a
Zhao, Huainan
c1914fa7-b5f5-454a-9ef0-a44114ecfe8b
Karpuz, Ahmet, Luo, Di, Xiao, Rongbing and Zhao, Huainan
(2022)
The effect of labour protection laws on the relationship between leverage and wages.
Journal of Banking & Finance.
(doi:10.1016/j.jbankfin.2022.106722).
Abstract
Previous research has shown that leverage has a positive effect on wages. Using US state-level labour protection laws as an exogenous shock, we find that the adoption of the law alleviates the effect of leverage on wages. We show that the mitigating effect on the leverage-wag relationship is more pronounced for firms with strong employee bargaining power. Our study highlights the positive role played by labour protection laws in lowering firms’ labour costs and improving their financial flexibility, which complements the literature and advances our understanding of the broad implications of labour protection laws.
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Accepted/In Press date: 19 November 2022
e-pub ahead of print date: 21 November 2022
Published date: 26 November 2022
Identifiers
Local EPrints ID: 472510
URI: http://eprints.soton.ac.uk/id/eprint/472510
ISSN: 0378-4266
PURE UUID: 71ed09c0-a09b-4899-8d46-8120e324ef88
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Date deposited: 07 Dec 2022 17:42
Last modified: 17 Mar 2024 03:44
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Contributors
Author:
Ahmet Karpuz
Author:
Di Luo
Author:
Rongbing Xiao
Author:
Huainan Zhao
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