Debt Structure as a Strategic Bargaining Tool

Debt Structure as a Strategic Bargaining Tool

Yue Qiu

Series number :

Serial Number: 
487/2016

Date posted :

January 01 2017

Last revised :

October 18 2017
SSRN Share

Keywords

  • Labor Union • 
  • Bankruptcy Cost • 
  • Debt Structure • 
  • regression discontinuity design

In this paper, I examine the strategic role of debt structure in improving the bargaining position of a firm’s management relative to its non-financial stakeholders. Debt structure is essential for strategic bargaining because it affects the ease of renegotiating debt contracts and thus the credibility of bankruptcy threats.

Using a regression discontinuity design, I show that debt structure is adjusted toward debt that is more difficult to renegotiate in response to an increase in employees’ negotiation power. Further analyses confirm that the debt structure adjustments are more likely driven by the strategic concerns of management, rather than by other explanations.

View full abstract

Authors

Professor
Real name:
Yue Qiu
Temple University