The Role of Government in the Labor-Creditor Relationship: Evidence from the Chrysler Bankruptcy

47 Pages Posted: 22 Aug 2011 Last revised: 2 Sep 2015

Bradley S. Blaylock

Oklahoma State University - Spears School of Business

Alexander Edwards

University of Toronto - Rotman School of Management

Jared R. Stanfield

University of New South Wales (UNSW) - School of Banking and Finance; Financial Research Network (FIRN)

Date Written: August 13, 2013

Abstract

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

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

Bradley S. Blaylock

Oklahoma State University - Spears School of Business ( email )

430 Business Building
Stillwater, OK 74078
United States

Alexander S. Edwards

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

Jared R. Stanfield (Contact Author)

University of New South Wales (UNSW) - School of Banking and Finance ( email )

Sydney, NSW 2052
Australia
+ 61 (02) 9385 4291 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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