Outside Purchase Contracts, Human Capital and Firm Capital Structure

59 Pages Posted: 15 Oct 2014 Last revised: 25 Sep 2021

See all articles by S. Katie Moon

S. Katie Moon

University of Colorado at Boulder - Leeds School of Business

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2014

Abstract

We examine the impact of outside purchase contracts on firm risk and firm capital structure. We find that firms with more outside purchase contracts have less risky cash flows. Despite these less risky cash flows, firms with these contracts also have less financial leverage especially when they operate in high value-added industries. Examining firm financing decisions, we document that firms with more outside contracts are more likely to issue private securities. Our results are consistent with firms with more outside purchase contracts using less leverage to decrease the expected costs of financial distress on their explicit and implicit contracting parties.

Suggested Citation

Moon, Katie and Phillips, Gordon M., Outside Purchase Contracts, Human Capital and Firm Capital Structure (October 2014). NBER Working Paper No. w20579, Available at SSRN: https://ssrn.com/abstract=2510587

Katie Moon (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Gordon M. Phillips

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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