Union Strikes and the Impact of Non-Financial Stake Holders on Capital Structure

Posted: 16 Feb 2010

See all articles by Brett W. Myers

Brett W. Myers

Texas Tech, Rawls College of Business

Alessio Saretto

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Date Written: February 15, 2010

Abstract

Leverage affects the relative bargaining power between firms and labor unions and, consistent with this, we find that unions are more likely to engage in a strike during contract negotiations if firm leverage has decreased in the preceding years. In response to a strike, firms increase leverage by actively repurchasing equity and issuing debt. This re-levering is most pronounced when unions win the strike, and is consistent with the idea that firms use leverage to bolster their bargaining power prior to the next contract negotiation. When companies win the strike, they do not increase leverage, consistent with the idea that they are satisfied with their bargaining position.

Keywords: Capital structure, Unions, Strikes

Suggested Citation

Myers, Brett W. and Saretto, Alessio, Union Strikes and the Impact of Non-Financial Stake Holders on Capital Structure (February 15, 2010). Available at SSRN: https://ssrn.com/abstract=1553305

Brett W. Myers

Texas Tech, Rawls College of Business ( email )

Lubbock, TX 79407
United States

Alessio Saretto (Contact Author)

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

800 Campbell Road
SM 31
Richardson, TX 75080
United States
972-883-5907 (Phone)

HOME PAGE: http://www.utdallas.edu/~axs125732

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