Unionization, Cash, and Leverage

46 Pages Posted: 20 Apr 2013 Last revised: 19 Nov 2016

See all articles by Martin C. Schmalz

Martin C. Schmalz

CEPR; University of Oxford - Finance; CESifo; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

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

Schmalz, Martin C. and Schmalz, Martin C., Unionization, Cash, and Leverage (April 15, 2015). Ross School of Business Paper No. 1215, Available at SSRN: https://ssrn.com/abstract=2254025 or http://dx.doi.org/10.2139/ssrn.2254025

Martin C. Schmalz (Contact Author)

CEPR ( email )

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University of Oxford - Finance ( email )

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European Corporate Governance Institute (ECGI) ( email )

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