DeGroote School of Business
L8S 4M4, Canada
Institutional Affiliation: McMaster University
Information about this author at RePEc
NBER Working Papers and Publications
|June 2019||Employee Costs of Corporate Bankruptcy|
with John R. Graham, Hyunseob Kim, Si Li: w25922
An employee’s annual earnings fall by 10% the year her firm files for bankruptcy and fall by a cumulative present value of 67% over seven years. This effect is more pronounced in thin labor markets and among small firms that are ultimately liquidated. Compensating wage differentials for this “bankruptcy risk” are approximately 2.3% of firm value for a firm whose credit rating falls from AA to BBB, about the same magnitude as debt tax benefits. Thus, wage premia for expected costs of bankruptcy are of sufficient magnitude to be an important consideration in corporate capital structure decisions.
|September 2017||Bankruptcy and the Cost of Organized Labor: Evidence from Union Elections|
with Murillo Campello, Janet Gao, Yue Zhang: w23869
Unionized workers are entitled to special treatment in bankruptcy court. This can be detrimental to other corporate stakeholders in default states, with unsecured creditors standing to lose the most. Using data on union elections covering several decades, we employ a regression discontinuity design to identify the effect of worker unionization on bondholders in bankruptcy states. Closely won union elections lead to significant bond value losses, especially when firms approach bankruptcy, have underfunded pension plans, and operate in non-RTW law states. Unionization is associated with longer, more convoluted, and costlier bankruptcy court proceedings. Unions further depress bondholders' recovery values as they are assigned seats on unsecured creditors' committees.
Published: Murillo Campello & Janet Gao & Jiaping Qiu & Yue Zhang, 2018. "Bankruptcy and the Cost of Organized Labor: Evidence from Union Elections," The Review of Financial Studies, vol 31(3), pages 980-1013.
|August 2011||Managerial Attributes and Executive Compensation|
with John R. Graham, Si Li: w17368
We study the role of firm- and manager-specific heterogeneities in executive compensation. We decompose the variation in executive compensation and find that time invariant firm and especially manager fixed effects explain a majority of the variation in executive pay. We then show that in many settings, it is important to include fixed effects to mitigate potential omitted variable bias. Furthermore, we find that compensation fixed effects are significantly correlated with management styles (i.e., manager fixed effects in corporate policies). Finally, the method used in the paper has a number of potential applications in financial economics.
Published: Graham, John R., Si Li, and Jiaping Qiu, 2011, Managerial Attributes and Executive Compensation, Review of Financial Studies 24, 1944-1979.
|December 2007||Corporate Misreporting and Bank Loan Contracting|
with John R. Graham, Si Li: w13708
This paper is the first to study the effect of financial restatement on bank loan contracting. Compared with loans initiated before restatement, loans initiated after restatement have significantly higher spreads, shorter maturities, higher likelihood of being secured, and more covenant restrictions. The increase in loan spread is significantly larger for fraudulent restating firms than other restating firms. We also find that after restatement, the number of lenders per loan declines and firms pay higher upfront and annual fees. These results are consistent with the view that banks use tighter loan contract terms to overcome risk and information problems arising from financial restatements.
Published: Graham, John R. & Li, Si & Qiu, Jiaping, 2008. "Corporate misreporting and bank loan contracting," Journal of Financial Economics, Elsevier, vol. 89(1), pages 44-61, July. citation courtesy of