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The Role of Government in the Labor–Creditor Relationship: Evidence from the Chrysler Bankruptcy

Published online by Cambridge University Press:  12 August 2015

Bradley Blaylock ,
Alexander Edwards  and
Jared Stanfield
Bradley Blaylock
Affiliation:
bradley.blaylock@okstate.edu, Oklahoma State University, Spears School of Business, Stillwater, OK 74078
Alexander Edwards
Affiliation:
alex.edwards@rotman.utoronto.ca, University of Toronto, Rotman School of Management, Toronto, ONT M5S 3E6, Canada
Jared Stanfield*
Affiliation:
j.stanfield@unsw.edu.au, UNSW Australia, UNSW Business School, Sydney, NSW 2052, Australia.
*
*Corresponding author: j.stanfield@unsw.edu.au
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Abstract

We examine the role of government in the labor–creditor relationship using the case of the Chrysler bankruptcy. As a result of the government intervention, firms in more unionized industries experienced lower event-window abnormal bond returns, higher abnormal bond yields, and lower cumulative abnormal bond returns. The results are stronger for firms closer to distress. We also observe the effect in firms in which labor bargaining power is stronger and those with larger pension liabilities. Overall, the results underline the importance of government as a significant force in shaping the agency conflict between creditors and workers.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 50 , Issue 3 , June 2015 , pp. 325 - 348
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2015 

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