Human capital costs, firm leverage, and unemployment rates

Akyol, A.C. and Verwijmeren, P. (2013) Human capital costs, firm leverage, and unemployment rates. Journal of Financial Intermediation, 22(3), pp. 464-481. (doi: 10.1016/j.jfi.2013.04.003)

Full text not currently available from Enlighten.


Because bankruptcy is costly for employees, theoretical studies argue that firms with higher leverage have to pay their employees higher wages. In this paper we empirically test this prediction. We find that firm leverage is positively related to the wages of employees, both in the United States and in the Netherlands. In the United States, the positive relation between wages and leverage is strongest in the 21st century, which is a period that also shows a positive relation between wages and unemployment rates. We conclude that the human capital costs of bankruptcy are an important disadvantage of debt.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Verwijmeren, Professor Patrick
Authors: Akyol, A.C., and Verwijmeren, P.
College/School:College of Social Sciences > Adam Smith Business School
Journal Name:Journal of Financial Intermediation
ISSN (Online):1096-0473

University Staff: Request a correction | Enlighten Editors: Update this record