Relationship between Leverage and the Bargaining Power of Labor Unions: Evidence from Theoretical and Empirical Perspectives

Estudios de Economia, Vol. 43, No. 1, 2016

18 Pages Posted: 27 Jun 2016

See all articles by Chil Sun Choi

Chil Sun Choi

Dong-A University, Business School, Students

Pando Sohn

Dong-A University

Ji-Yong Seo

Sangmyung University - Department of Business Administration

Date Written: June 24, 2016

Abstract

This study examines whether a firm’s leverage can be used strategically to improve its bargaining position with an organized labor union using samples of non-financial firms listed on the Korean Stock Exchange (KSE) from 1999 to 2013. Through empirical testing, we find that the portfolio with the lowest union labor coverage has the lowest leverage, while the portfolio with the highest union labor coverage has the highest leverage. We also find that collective bargaining power positively affects leverage through the regression of leverage on the bargaining power of the labor union, regardless of the analysis methods, such as static and dynamic models. With a robustness test model that used the industry adjusted labor union concentration index (IUCI), we obtain evidence that collective bargaining power positively influences leverage, which corresponds with the regression results. In conclusion, we suggest the existence of evidence demonstrating that variables related to labor unions affect leverage levels, as suggested in previous studies.

Keywords: Leverage, bargaining position, union labor coverage, static and dynamic models

JEL Classification: G30, G32

Suggested Citation

Sun Choi, Chil and Sohn, Pando and Seo, Ji-Yong, Relationship between Leverage and the Bargaining Power of Labor Unions: Evidence from Theoretical and Empirical Perspectives (June 24, 2016). Estudios de Economia, Vol. 43, No. 1, 2016, Available at SSRN: https://ssrn.com/abstract=2800290

Chil Sun Choi

Dong-A University, Business School, Students ( email )

2-Ga Bumin-Dong
Busan
Korea, Republic of (South Korea)

Pando Sohn (Contact Author)

Dong-A University ( email )

37, Nakdong-daero 550(obaegosip)be
Saha-gu, Busan 604-714
Korea, Republic of (South Korea)

Ji-Yong Seo

Sangmyung University - Department of Business Administration ( email )

20, Hongjimun 2-gil, Jongno-gu
Seoul, 110-743
Korea, Republic of (South Korea)

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