TY - JOUR
T1 - Firm leverage and employee pay
T2 - The moderating role of CEO leadership style
AU - Gill, Balbinder Singh
AU - Choi, Jongmoo Jay
AU - John, Kose
N1 - Publisher Copyright:
© 2024 Elsevier Inc.
PY - 2024/10
Y1 - 2024/10
N2 - We investigate how a CEO's leadership style moderates the relationship between leverage and average employee pay. We first show that the relationship between leverage and average employee pay is negative, consistent with the leverage disciplinary hypothesis. Next, we examine how CEO leadership style moderates this negative effect. We find that CEOs with more charisma reduce the disciplinary effect of leverage. The humane CEOs of companies with more debt sharpen the disciplinary effect by paying their employees less for increased risk of job loss that comes with high leverage. An important policy implication is that CEO leadership style can influence the outcome of labor management negotiations regarding employee pay.
AB - We investigate how a CEO's leadership style moderates the relationship between leverage and average employee pay. We first show that the relationship between leverage and average employee pay is negative, consistent with the leverage disciplinary hypothesis. Next, we examine how CEO leadership style moderates this negative effect. We find that CEOs with more charisma reduce the disciplinary effect of leverage. The humane CEOs of companies with more debt sharpen the disciplinary effect by paying their employees less for increased risk of job loss that comes with high leverage. An important policy implication is that CEO leadership style can influence the outcome of labor management negotiations regarding employee pay.
KW - Capital structure
KW - CEO leadership style
KW - Corporate governance
KW - Employee pay
KW - Insolvency law
KW - Labor negotiations
KW - Leverage
UR - http://www.scopus.com/inward/record.url?scp=85195180540&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85195180540&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2024.103382
DO - 10.1016/j.irfa.2024.103382
M3 - Article
AN - SCOPUS:85195180540
SN - 1057-5219
VL - 95
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 103382
ER -