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Human Capital Specificity and Corporate Capital Structure

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Date
2012
Author
Kim, Hyunseob
Advisor
Graham, John R.
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Abstract

I examine how employing workers with specific human capital affects capital structure decisions by employers. Based on plant-level data from the U.S. Census Bureau, I use the opening of new plants as an exogenous reduction in human capital specificity-- the inability to transfer specific skill sets across employers--for incumbent workers in a local labor market. My results indicate that the opening of a new manufacturing plant in a given county leads to a 2.6-3.9% increase in the leverage of existing manufacturing firms in the county, relative to the leverage of manufacturing firms in an otherwise comparable county. Moreover, plant openings have a larger impact on firms that are more likely to share labor with the new plant, that have high labor intensity, and that have high marginal tax benefits of debt. Alternative explanations concerning productivity spillovers, product market competition, and county-wide shocks do not appear to account for the results. I find consistent evidence in a separate sample that contains a broad panel of firms. Overall, these results suggest that human capital specificity raises the cost of debt and thus decreases optimal leverage.

Type
Dissertation
Department
Business Administration
Subject
Finance
Economics, Labor
Economics
Asset Specificity
Capital Structure
Cost of Debt
Human Capital
Local Labor Market
Natural Experiment
Permalink
https://hdl.handle.net/10161/5435
Citation
Kim, Hyunseob (2012). Human Capital Specificity and Corporate Capital Structure. Dissertation, Duke University. Retrieved from https://hdl.handle.net/10161/5435.
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This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.

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