Unionization, Cash, and Leverage
46 Pages Posted: 20 Apr 2013 Last revised: 19 Nov 2016
Date Written: April 15, 2015
What is the effect of unionization on corporate financial policies? The average unionized firm responds with lower cash and higher leverage to a unionization election than the average firm escaping unionization. However, using a regression discontinuity design I find that the causal effect of unionization is close to zero on average, but heterogeneous across firms. For the subset of large and financially unconstrained firms, the causal effect is positive on leverage and negative on cash; the opposite is true for small and financially constrained firms. These results help reconcile controversially discussed views on how corporate finance and labor interact.
Keywords: Capital Structure, Cash, Risk Management, Labor Adjustment Costs, Unionization, Regression Discontinuity
JEL Classification: G32, J50
Suggested Citation: Suggested Citation