Abstract
This paper examines the impact of labor regulations that restrict firms’ flexibility to adjust labor resources on the cost of corporate bank loans. Using within-country variation in employment protection legislation across 25 countries, I find that increases in employment protection lead to higher loan spreads, tighter nonprice loan contract terms, and more diffuse loan ownership structure. The effects of labor regulations are greater in industries with a higher rate of labor turnover and among borrowers with a higher probability of default. These results suggest that rigidities imposed by labor regulations have a significant impact on firms’ cost of capital.
| Original language | English |
|---|---|
| Pages (from-to) | 37-74 |
| Journal | Journal of Law and Economics |
| Volume | 58 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 1 Feb 2015 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth -
SDG 9 Industry, Innovation, and Infrastructure -
SDG 10 Reduced Inequalities
Publisher's Copyright Statement
- COPYRIGHT TERMS OF DEPOSITED FINAL PUBLISHED VERSION FILE: © 2015 by The University of Chicago. All rights reserved. Alimov, A. (2015). Labor protection laws and bank loan contracting. Journal of Law and Economics, 58(1), 37-74. https://doi.org/10.1086/682908. This full text is made available under CC-BY-NC 4.0. https://creativecommons.org/licenses/by-nc/4.0/.
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- Cited in Policy Documents
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