47 Pages Posted: 22 Aug 2011 Last revised: 2 Sep 2015
Date Written: August 13, 2013
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.
Keywords: Organized Labor, Bankruptcy, Government Intervention, Cost of Debt
JEL Classification: G32, G33, G38
Suggested Citation: Suggested Citation
Blaylock, Bradley S. and Edwards, Alexander and Stanfield, Jared R., The Role of Government in the Labor-Creditor Relationship: Evidence from the Chrysler Bankruptcy (August 13, 2013). Journal of Financial and Quantitative Analysis 50 (3), June 2015, pp 325 - 348. Available at SSRN: https://ssrn.com/abstract=1685618 or http://dx.doi.org/10.2139/ssrn.1685618