Negotiating with labor under financial distress

Efraim Benmelech, Nittai K. Bergman, Ricardo J. Enriquez

Research output: Contribution to journalArticlepeer-review


We analyze how firms renegotiate labor contracts to extract concessions from labor. While anecdotal evidence suggests that firms tend to renegotiate wages downward in times of financial distress, there is no empirical evidence that documents such renegotiation, its determinants, and its magnitude. This article attempts to fill this gap. Using a unique data set of airlines, which includes detailed information on wages and pension plans, we document an empirical link between airline financial distress, pension underfunding, and wage concessions.

Original languageEnglish
Pages (from-to)28-67
Number of pages40
JournalReview of Corporate Finance Studies
Issue number1
StatePublished - 1 Sep 2012
Externally publishedYes


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