Bae, Kee-Hong, Jun-Koo Kang and Jin Wang. "Employee Treatment and Firm Leverage: A Test of the Stakeholder Theory of Capital Structure". Journal of Financial Economics , Forthcoming, 2010.

Abstract is available at SSRN:
This paper contributes to a growing number of studies that discusses the implications of CSR for firms' capital structure decisions. This empirical study investigates the so-called Stakeholder Theory of Capital Structure by focusing on a firm’s relationships with its employees. Consistent with earlier studies, the authors conclude that firms that treat their employees fairly (as measured by KLD ratings and Fortune's Best Companies to Work for magazine) maintain low(er) debt ratios. The study points out that fair employee treatment has implications for financing policy.