TY  - JOUR
AU  - Berk,Jonathan B.
AU  - Stanton,Richard
AU  - Zechner,Josef
TI  - Human Capital, Bankruptcy and Capital Structure
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13014
PY  - 2007
Y2  - April 2007
UR  - http://www.nber.org/papers/w13014
L1  - http://www.nber.org/papers/w13014.pdf
N1  - Author contact info:
Jonathan B. Berk
Graduate School of Business
Stanford University
518 Memorial Way
Stanford CA 94305-5015
Tel: 650/721-1280
Fax: 650/725-6152
E-Mail: jonathan.b.berk@gmail.com

Richard Stanton
Haas School of Business
University of California, Berkeley
545 Student Services Bldg #1900
Berkeley, CA 94720-1900
Tel: 510-642-7382
E-Mail: stanton@haas.berkeley.edu

Josef Zechner
Department of Finance
University of Vienna
E-Mail: josef.zechner@univie.ac.at
AB  - 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.
ER  -