Leverage and the Interaction between Firms and Non-Financial Stakeholders: Evidence from Contract Negotiations and Union Strikes
University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics
Brett W. Myers
Texas Tech, Rawls College of Business
August 10, 2011
We use contract negotiation data to study how leverage affects the interaction between firms and an important non-financial stakeholder, labor unions. Consistent with the idea that leverage diminishes the bargaining position of labor, we find that unions are less likely to strike when a firm has high leverage or increases leverage prior to a contract negotiation. Consistent with the idea that firms intentionally use leverage to improve their bargaining position, we find that firms facing a high likelihood of a strike increase their leverage, as do firms that have recently experienced a strike.
Number of Pages in PDF File: 47
Keywords: leverage, non-financial stakeholders, contract negotiations, union strikes
JEL Classification: G32, J52
Date posted: August 11, 2011
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