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Firing Costs and Capital Structure Decisions

I explore the passage of wrongful discharge laws by U.S. state courts that allow workers to sue employers for unjust dismissal as an exogenous increase in employee firing costs. I find that firms reduce debt ratios following the adoption of these laws, and this result is strongest for subsamples of firms that experience larger increases in expected firing costs. Following the passage of these laws, firms also increase cash holdings, firms save more cash out of cash flows, and investors place a higher value on each additional dollar of cash holdings. Overall, my results indicate that employee firing costs can have an important impact on corporate financial policy decisions.

Identiferoai:union.ndltd.org:arizona.edu/oai:arizona.openrepository.com:10150/555889
Date January 2015
CreatorsSerfling, Matthew
ContributorsKlasa, Sandy, Klasa, Sandy, Klasa, Sandy, Kahle, Kathleen, Ortiz-Molina, Hernan, Williams, Ryan, Woutersen, Tiemen
PublisherThe University of Arizona.
Source SetsUniversity of Arizona
Languageen_US
Detected LanguageEnglish
Typetext, Electronic Dissertation
RightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.

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