Labor Unions, Bargaining Power and Corporate Bond Yield Spreads: Structural Credit Model Perspectives

47 Pages Posted: 17 Mar 2010 Last revised: 30 Dec 2010

See all articles by Tsung-Kang Chen

Tsung-Kang Chen

National Chiao Tung University

Yan-Shing Chen

National Taiwan University

Hsien-Hsing Liao

National Taiwan University

Date Written: February 22, 2010

Abstract

This study investigates labor union effects on bond yield spreads from perspectives of structural credit models by employing American bond observations from 2001 to 2007. This research finds that union strength significantly and positively relates to bond yield spreads (This effect is roughly equal to that of issuer rating for one standard deviation change when controlling for well-known variables). The empirical results also show that the positive effects become weaker when management has higher bargaining power. Additionally, union strength volatility significantly and negatively relates to bond yield spreads and capital structure (leverage). The above results are robust when controlling for credit ratings, collinearity concerns, industry effect and tax effect.

Keywords: Labor union, Bargaining power, Credit risk, Bond yield spreads

JEL Classification: G33, J52, J53

Suggested Citation

Chen, Tsung-Kang and Chen, Yan-Shing and Liao, Hsien-Hsing, Labor Unions, Bargaining Power and Corporate Bond Yield Spreads: Structural Credit Model Perspectives (February 22, 2010). Available at SSRN: https://ssrn.com/abstract=1572377 or http://dx.doi.org/10.2139/ssrn.1572377

Tsung-Kang Chen

National Chiao Tung University ( email )

No. 1001, Dasyue Rd., East Dist.,
Hsinchu City, 300
Taiwan

Yan-Shing Chen

National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan

Hsien-Hsing Liao (Contact Author)

National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

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