Do unemployment benefits affect the choice of debt source?
Author | Ben-Nasr, Hamdi |
Available date | 2020-05-14T09:55:46Z |
Publication Date | 2019 |
Publication Name | Journal of Corporate Finance |
Resource | Scopus |
ISSN | 9291199 |
Abstract | This study examines whether labor unemployment risk affects the choice of debt source. Specifically, we examine whether US unemployment insurance (UI) benefits, which reduce unemployment risk, lead to a heavy reliance on bank debt. Through difference-in-difference analysis, we find that firms in states with generous UI benefits tend to rely more on bank debt, supporting the monitoring avoidance channel. This finding is robust to a battery of robustness tests. We also find that the positive relationship between UI benefits and bank debt ratio is more pronounced in firms from highly unionized states, labor-intensive firms, and firms with higher asset substitution risk. Finally, we find that debt maturity (security) decreases (increases) when UI benefits increase. - 2019 Elsevier B.V. |
Language | en |
Publisher | Elsevier B.V. |
Subject | Bank debt Compensating wage differential Labor unemployment insurance Public debt Unemployment risk |
Type | Article |
Pagination | 88-107 |
Volume Number | 56 |
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