Capital structure and staff salary: empirical evidence in Brazil

This paper analyzes whether the higher the company's financial leverage, the higher the salaries demanded by staff for the embedded financial distress risk. By applying Berk, Stanton and Zechner's (2010) model, we use a2SLS for a sample of 250 non-financial companies listed onBOVESPAfrom 2007 to 2009. Indeed, we find that for each additional 1% of financial leverage, the staff remunerations increase by 0.26%, controlling for Chief Executive Officer (CEO) profile.