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Asset specificity, unionization and the firm's use of debt

โœ Scribed by Joseph K. Cavanaugh; John Garen

Book ID
101287147
Publisher
John Wiley and Sons
Year
1997
Tongue
English
Weight
134 KB
Volume
18
Category
Article
ISSN
0143-6570

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โœฆ Synopsis

This paper considers the combined influence of asset specificity and unionization on the firm's use of debt. While previous literature tends to examine these effects separately, we find that the interaction of the two is critical. Thus, while asset specificity may reduce debt as in , the presence of a strong union offsets this. Unionization increases the firm's debt as in Bronars and Deere (1991), but asset generality diminishes this effect. We model and test the interactive nature of these two effects. Using firm-specific unionization data and various proxies for asset specificity, we find support for our model.

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โœ Jon Vilasuso; Alanson Minkler ๐Ÿ“‚ Article ๐Ÿ“… 2001 ๐Ÿ› Elsevier Science ๐ŸŒ English โš– 98 KB

We develop a dynamic model that incorporates the insights of both the agency cost and asset specificity literature about corporate finance. In general, we find that neither can be ignored, and that the optimal capital structure minimizes agency cost and asset specificity considerations. A key findin