Chapter 1: Product Market Strategy and Capital Structure: Evidence from Resale Price Maintenance', "This paper studies how a firm's pricing strategy affects its financial leverage. Retailers vary in pricing strategy, ranging from low markup (i.e., ``discount''), no frills retailers to high markup retailers that offer extensive service. The choice of strategy affects the firm's risks and opportunities and therefore debt capacity. The high-end strategy, for example, exposes the firm to price wars and freeriding by discount rivals that could drive it into financial distress. The cross-section of firms shows a negative relationship between markup and leverage, but the direction of causality is unclear. To establish causality, I exploit changes in the legality of discount pricing strategies to identify their effect on leverage. In various U.S. states and years, manufacturers could use resale price maintenance (RPM) to set the minimum price a retailer can charge. I find that allowing RPM leads discount retailers to reduce leverage and other retailers to increase it. The results show that firms choose a financial structure closely tied to their product market strategy.", 'Chapter 2: Changing Tax Incentives and Expected Leverage Reduction ', "This paper studies market expectations about firms' leverage responses to a large change in tax incentives. The Tax Cuts and Jobs Act (TCJA), passed in December 2017, both lowered the corporate tax rate and limited the amount of interest that can be deducted for tax purposes. Therefore, it significantly reduced the tax incentives to carry leverage in the firm's capital structure. In an efficient market, the updated valuations of firms previously relying on a tax shield should reflect the lost tax shield value. Moreover, the valuation update should reflect market expectations about the firm's capital structure response to the change in incentives. For example, a static trade-off model would predict that a firm will re-optimize its capital structure by reducing leverage. However, there are potential frictions, such as the leverage ratchet effect. Examining firm returns around the passage of the TCJA, I find that firms with higher leverage did indeed have lower returns. Furthermore, the magnitudes of those losses relative to less levered peers are consistent with expected future leverage reduction. That is, market participants updated valuations as if they expect firms to reduce leverage in response to the reduced tax incentives.Chapter 3: Industry Volatility and Workers' Demand for Collective BargainingThis paper examines how industry volatility affects a worker's decision to unionize. When deciding whether to vote for unionization, workers weigh the potential gain from higher wages with the risks of reduced employment. Using a database of thousands of unionization elections, I exploit the approximately two-month waiting period between when workers petition the National Labor Relations Board to hold an election and when the actual vote occurs. I find that higher industry equity volatility during the waiting period is associated with fewer votes in favor of unionization. Unemployment insurance, which mitigates workers' costs of job loss, dampens the response to industry volatility. Volatility heightens workers' concerns about job loss as it shifts the risk-return tradeoff for pivotal voters away from unionization."]

Last modified

• 09/30/2019

Creator

• Grant Thomas Clayton

DOI

• https://doi.org/10.21985/n2-tbdw-8g62

Subject

• Finance

Keyword

• Finance

Date created

• 1/1/2018

Resource type

• Dissertation

Rights statement

• In Copyright