Starjournal Quotation Berk, Jonathan, Stanton, Richard, Zechner, Josef. 2010. Human Capital, Bankruptcy and Capital Structure. Journal of Finance 65 (3): S. 891-926.




We derive a firm's optimal capital structure and managerial compensation contract when employees are averse to bearing their own human capital risk, while equity holders can diversify this risk away. In the presence of corporate taxes, our model delivers optimal debt levels consistent with those observed in practice. It also makes a number of predictions for the cross-sectional distribution of firm leverage. Consistent with existing empirical evidence, it implies persistent idiosyncratic differences in leverage across firms. An important new empirical prediction of the model is that, ceteris paribus, firms with more leverage should pay higher wages.


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Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Finance
Citation Index SSCI
WU Journalrating 2009 A+
Starjournal Y
Language English
Title Human Capital, Bankruptcy and Capital Structure
Volume 65
Number 3
Year 2010
Page from 891
Page to 926


Zechner, Josef (Details)
Berk, Jonathan (University of California at Berkeley, United States/USA)
Stanton, Richard (University of California at Berkeley, United States/USA)
Institute for Finance, Banking and Insurance IN (Details)
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