Publicação
The impact of unemployment subsidies on firms- corporate finance choices and credit ratings. an analysis on the effects of economic cyclicality
| Resumo: | This paper studies the relation between unemployment subsidies, considered as a proxy for the unemployment risk, and corporate finance decisions. It is empirically demonstrated that a decrease in the generosity of unemployment compensations - because of the lower recipiency rate - is associated with lower debt levels, partly to mitigate the greater risk of costly layoffs faced by employees. The reduction in leverage is particularly severe for cyclical firms. Furthermore, the paper proves the absence of a relation between changes in unemployment benefits and firms’ default risk, as their credit ratings and interest coverage ratios remain constant. |
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| Autores principais: | Mazzali, Francesca |
| Assunto: | Labor economics Unemployment subsidies Capital structure Leverage Credit ratings Default risk U.S. Cyclicality Size Age. |
| Ano: | 2023 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade Nova de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório Institucional da UNL |
| Resumo: | This paper studies the relation between unemployment subsidies, considered as a proxy for the unemployment risk, and corporate finance decisions. It is empirically demonstrated that a decrease in the generosity of unemployment compensations - because of the lower recipiency rate - is associated with lower debt levels, partly to mitigate the greater risk of costly layoffs faced by employees. The reduction in leverage is particularly severe for cyclical firms. Furthermore, the paper proves the absence of a relation between changes in unemployment benefits and firms’ default risk, as their credit ratings and interest coverage ratios remain constant. |
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