Abstract

http://ssrn.com/abstract=982680
 
 

References (56)



 
 

Citations (31)



 


 



The Strategic Use of Corporate Cash Holdings in Collective Bargaining with Labor Unions


Sandy Klasa


University of Arizona - Department of Finance

William F. Maxwell


SMU - Cox School

Hernan Ortiz-Molina


University of British Columbia (UBC) - Sauder School of Business

March 1, 2008

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We provide evidence that firms in more unionized industries strategically hold less cash to gain bargaining advantages over labor unions and shelter corporate income from their demands. Specifically, we show that corporate cash holdings are negatively related with industry unionization rates. We also find that this relation is stronger for firms that are likely to place a higher value on gaining a bargaining advantage over unions and weaker for those firms in which lower cash holdings provides less credible evidence that a firm is unable to concede to union demands. Additionally, we document that unionized firms manage their cash holdings downward prior to labor negotiations and that increases in cash holdings raise the probability of a strike. Finally, we show that unionization decreases the market value of a dollar of cash holdings. Overall, our findings indicate that firms trade-off the benefits of corporate cash holdings with the costs resulting from a weaker bargaining position with labor.

Number of Pages in PDF File: 58

Keywords: Cash holdings, liquidity policy, hedging, labor unions

JEL Classification: G31, G32, J52

Accepted Paper Series





Download This Paper

Date posted: April 27, 2007 ; Last revised: May 28, 2009

Suggested Citation

Klasa, Sandy and Maxwell, William F. and Ortiz-Molina, Hernan, The Strategic Use of Corporate Cash Holdings in Collective Bargaining with Labor Unions (March 1, 2008). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=982680

Contact Information

Sandy Klasa (Contact Author)
University of Arizona - Department of Finance ( email )
McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-8761 (Phone)
William F. Maxwell
SMU - Cox School ( email )
Maguire Bldg, RM 440C
Dallas, TX, TX 75214
United States
Hernan Ortiz-Molina
University of British Columbia (UBC) - Sauder School of Business ( email )
2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-6095 (Phone)
604-822-4695 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 2,190
Downloads: 553
Download Rank: 27,032
References:  56
Citations:  31

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.312 seconds