Employment Flexibility and Capital Structure: Evidence from a Natural Experiment

This paper draws from chapter 2 of my doctoral dissertation at Columbia GSB, also circulated under the title “Operating Flexibility and Capital Structure: Evidence from a Natural Experiment.” The author thanks Ignacio García-Pérez for sharing data on subsidies and Kenneth Ahern (discussant), Sven Arnold, Efraim Benmelech (discussant), Patrick Bolton, Vicente Cuñat, Andrew Ellul, Guido Friebel, Maria Guadalupe, Irina Ivashkovskaya (discussant), Wei Jiang, Peter MacKay, David Matsa (discussant), Thomas Noe, Sarmistha Pal, Daniel Paravisini, Francisco Perez-Gonzalez (discussant), Michael Roberts, Bernard Salanié, Carsten Sprenger, Sergey Stepanov, Catherine Thomas, Vikrant Vig, Daniel Wolfenzon, seminar participants at Columbia, Goethe University Frankfurt, New Economic School, University of Maryland, University of Surrey, University of Cambridge, Center for Economic Research and Graduate Education - Economics Institute (CERGE-EI), and participants of the 2014 American Finance Association meeting in Philadelphia, 1st Centre for Studies in Economics and Finance Conference on Finance and Labor, 2013 Financial Intermediation Research Society meeting in Dubrovnik, 2012 December International Paris Finance meeting, 2012 International Finance and Banking Society meeting in Valencia, and the New Economic School 20th Anniversary Conference for conversations and suggestions. All remaining errors are my own.