Abstract
Using the healthcare industry as a novel laboratory, I study whether a firm’s use of debt enhances its bargaining power during negotiations with nonfinancial stakeholders. I find that reimbursement rates negotiated between a hospital and insurers for two homogeneous procedures are higher when the hospital has more debt. This relation is stronger among hospitals with less bargaining power relative to insurers ex ante. The evidence is consistent with the idea that debt improves a firm’s bargaining power. This paper was accepted by Renee Adams, finance.
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