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Wage negotiations and capital structure: a strategic bargaining approach

Dalmazzo, Alberto (1992) Wage negotiations and capital structure: a strategic bargaining approach. CEPDP, 91. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

We analyse the relations between firm''s debt and bargained wage level and its implications for the optimal choice of the capital structure. Similarly to Hart and Moore (1991), we place the analysis of the feasible debt contracts in a strategic bargaining setting, in which both the management and the workforce of the firm have human capital specificities in production. We obtain that debt repayments constrain wage levels, providing an advantage for debt financing. Moreover, either under investment can arise, due to wealth constraints, or on the contrary, firms may borrow more than what is required by the production process.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 1992 Alberto Dalmazzo
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 91
Date Deposited: 20 Aug 2008 15:47
URL: http://eprints.lse.ac.uk/21037/

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