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Leverage and the Interaction between Firms and Non-Financial Stakeholders: Evidence from Contract Negotiations and Union StrikesAlessio SarettoUniversity of Texas at Dallas - School of Management - Department of Finance & Managerial Economics Brett W. MyersTexas Tech, Rawls College of Business August 10, 2011 Abstract: 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 working papers seriesDate posted: August 11, 2011Suggested CitationContact Information
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