The Chrysler Effect : The Impact of the Chrysler Bailout on Borrowing Costs

Anginer, Deniz ; Warburton, A. Joseph

关键词: ABSOLUTE PRIORITY RULE;    ACCOUNTING;    ASSET SALE;    ASSETS;    BAILOUT;   

DOI  :  10.1596/1813-9450-5462
RP-ID  :  WPS5462

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Did the U.S. government'sintervention in the Chrysler reorganization overturnbankruptcy law? Critics argue that the government-sponsoredreorganization impermissibly elevated claims of the autounion over those of Chrysler's other creditors. If thecritics are correct, businesses might suffer an increase intheir cost of debt because creditors will perceive a newrisk, that organized labor might leap-frog them inbankruptcy. This paper examines the financial market wherethis effect would be most detectible, the market for bondsof highly unionized companies. The authors find no evidenceof a negative reaction to the Chrysler bailout bybondholders of unionized firms. They thus reject the notionthat investors perceived a distortion of bankruptcypriorities. To the contrary, bondholders of unionized firmsreacted positively to the Chrysler bailout. This evidencesuggests that bondholders interpreted the Chrysler bailoutas a signal that the government will stand behind unionizedfirms. The results are consistent with the notion thattoo-big-to-fail government policies generate moral hazard inthe credit markets.