Organized Labor and Loan Pricing: A Regression Discontinuity Design Analysis

43 Pages Posted: 7 Apr 2016 Last revised: 4 Oct 2016

See all articles by Yue Qiu

Yue Qiu

Temple University

Tao Shen

Tsinghua University

Date Written: May 12, 2016

Abstract

This paper provides new evidence on the effect of unionization on cost of bank loans. By using a regression discontinuity design, we establish a causal relation from new unionization to bank loan pricing. Relative to firms in which unions barely lose elections, firms in which unions barely win elections experience an increase in the spread of the newly originated loans. Further tests suggest that the effect of labor unions on loan spread is through reducing recovery rate of banks in bankruptcy rather than increasing firms' default risk.

Keywords: labor unions, bank loans, regression discontinuity design

JEL Classification: G32, J51

Suggested Citation

Qiu, Yue and Shen, Tao, Organized Labor and Loan Pricing: A Regression Discontinuity Design Analysis (May 12, 2016). Available at SSRN: https://ssrn.com/abstract=2579512 or http://dx.doi.org/10.2139/ssrn.2579512

Yue Qiu

Temple University ( email )

Philadelphia, PA 19122
United States

Tao Shen (Contact Author)

Tsinghua University ( email )

Department of Finance
School of Economics and Management
China

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