The Role of Government in the Labor-Creditor Relationship: Evidence from the Chrysler Bankruptcy
Bradley S. Blaylock
Oklahoma State University - Spears School of Business
University of Toronto - Rotman School of Management
Jared R. Stanfield
UNSW Australia - School of Banking and Finance; Financial Research Network (FIRN)
August 13, 2013
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
We examine the role of government in the labor-creditor relationship using the case of the Chrysler bankruptcy. As a result of the government intervention, firms in more unionized industries experienced lower event-window abnormal bond returns, higher abnormal bond yields, and lower cumulative abnormal bond returns. The results are stronger for firms closer to distress. We also observe the effect in firms in which labor bargaining power is stronger and those with larger pension liabilities. Overall, the results underline the importance of government as a significant force in shaping the agency conflict between creditors and workers.
Number of Pages in PDF File: 47
Keywords: Organized Labor, Bankruptcy, Government Intervention, Cost of Debt
JEL Classification: G32, G33, G38
Date posted: August 22, 2011 ; Last revised: August 15, 2013
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