Debt, Operating Margin, and Investment in Workplace Safety

We investigate how a firm's financial performance affects workplace safety. We provide empirical estimates of the relationship between a firm's financial condition and its investment in workplace safety using plant-level proxies for safety performance from OSHA records for thirteen large U.S. industries for the period 1972-87. Our results suggest that, at the lowest levels of operating margins, firms with higher operating margins have safer workplaces. Firms with more debt also have safer workplaces, but only when operating margins are relatively low. These results are consistent with a number of theoretical models in which financial factors influence operating decisions.

[1]  T. Beard.  Bankruptcy and Care Choice , 1990 .

[2]  Moshe Kim,et al.  Technology, debt and the exploitation of growth options , 1990 .

[3]  R S Smith,et al.  The impact of OSHA inspections on manufacturing injury rates. , 1979, The Journal of human resources.

[4]  F. Windmeijer.  Moment conditions for fixed effects count data models with endogenous regressors , 2000 .

[5]  S. Myers.  Determinants of corporate borrowing , 1977 .

[6]  N. Rose.  Profitability and Product Quality: Economic Determinants of Airline Safety Performance , 1990, Journal of Political Economy.

[7]  Devra L. Golbe.  PRODUCT SAFETY IN A REGULATED INDUSTRY: EVIDENCE FROM THE RAILROADS , 1983 .

[8]  John W. Ruser,et al.  Reestimating OSHA's Effects Have the Data Changed? , 1991 .

[9]  D. Weil,et al.  Enforcing OSHA: The Role of Labor Unions , 1991 .

[10]  Devra L. Golbe.  Safety and Profits in the Airline Industry , 1986 .

[11]  J. S. Silva,et al.  Endogeneity in Count Data Models: An Application to Demand for Health Care , 1997 .

[12]  Kunal Sengupta,et al.  Sunk investment, bargaining, and choice of capital structure , 1993 .

[13]  Stephen G. Bronars,et al.  The Threat of Unionization, the Use of Debt, and the Preservation of Shareholder Wealth , 1991 .

[14]  Steven M. Fazzari,et al.  Financing Constraints and Corporate Investment , 1987 .

[15]  Wesley M. Cohen.  Incomplete markets, intra-industry firm heterogeneity and investment: The case of uranium exploration , 1990 .

[16]  James L. Medoff,et al.  The Employer Size-Wage Effect , 1989, Journal of Political Economy.

[17]  S. Abraham Ravid,et al.  On Interactions of Production and Financial Decisions , 1988 .

[18]  M. C. Jensen,et al.  Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers , 1999 .

[19]  Georges Dionne,et al.  Debt, moral hazard and airline safety An empirical evidence , 1997 .

[20]  David P. McCaffrey.  An Assessment of Osha's Recent Effects on Injury Rates , 1983 .

[21]  Jean-Charles Rochet,et al.  Risk-Taking Behavior with Limited Liability and Risk Aversion , 1997 .

[22]  Joseph V. Terza,et al.  Estimating count data models with endogenous switching: Sample selection and endogenous treatment effects , 1998 .

[23]  P. R. Wyman.  Regulating for safety , 1987 .

[24]  W. Kip Viscusi,et al.  The Impact of Occupational Safety and Health Regulation , 1979 .

[25]  D. Scharfstein,et al.  Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups , 1991 .

[26]  J. Feinstein,et al.  Detection Controlled Estimation , 1990, The Journal of Law and Economics.

[27]  J. Angrist,et al.  Digitized by the Internet Archive in 2011 with Funding from Estimation of Limited-dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice , 2011 .

[28]  Bronwyn H Hall,et al.  The R&D Master File Documentation , 1988 .

[29]  Charles W. Calomiris,et al.  Firm Heterogeneity, Internal Finance, and `Credit Rationing&Apos; , 1990 .

[30]  Financial aspects of motor carrier safety inspection performance , 1992 .

[31]  Steven Shavell,et al.  A MODEL OF THE OPTIMAL USE OF LIABILITY AND SAFETY REGULATION , 1984 .

[32]  Jonathan S. Feinstein,et al.  The Safety Regulation of U.S. Nuclear Power Plants: Violations, Inspections, and Abnormal Occurrences , 1989, Journal of Political Economy.

[33]  W. Gray,et al.  Are Osha Health Inspections Effective? a Longitudinal Study in the Manufacturing Sector , 1990 .

[34]  S. Zeger,et al.  Longitudinal data analysis using generalized linear models , 1986 .

[35]  Merton H. Miller.  The Cost of Capital, Corporation Finance and the Theory of Investment , 1958 .

[36]  F. Modigliani,et al.  CORPORATE INCOME TAXES AND THE COST OF CAPITAL: A CORRECTION , 1963 .

[37]  R. Brooks.  Liability and Organizational Choice* , 2002, The Journal of Law and Economics.

[38]  Tracy R. Lewis,et al.  Oligopoly and Financial Structure: The Limited Liability Effect , 1986 .

[39]  Devra L. Golbe.  Risk-taking by firms near bankruptcy , 1988 .

[40]  W. Kip Viscusi,et al.  The Impact of Occupational Safety and Health Regulation, 1973-1983 , 1986 .

[41]  Joseph S. Tracy,et al.  The Effects of Unions on Firm Behavior: An Empirical Analysis Using Firm‐Level Data , 1994 .

[42]  The Output Decision of a Risk‐Neutral Producer Under Risk of Liquidation , 2000 .

[43]  Wayne B. Gray,et al.  OSHA enforcement and workplace injuries: A behavioral approach to risk assessment , 1990 .

[44]  B. Larson.  Environmental Policy Based on Strict Liability: Implications of Uncertainty and Bankruptcy , 1996 .