Bankruptcy and the Cost of Organized Labor: Evidence from Union Elections

70 Pages Posted: 2 Oct 2017

See all articles by Murillo Campello

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Janet Gao

Indiana University - Kelley School of Business

Jiaping Qiu

McMaster University - Michael G. DeGroote School of Business

Yue Zhang

Université catholique de Louvain - Louvain Finance and CORE

Multiple version iconThere are 2 versions of this paper

Date Written: September 2017

Abstract

Unionized workers are entitled to special treatment in bankruptcy court. This can be detrimental to other corporate stakeholders in default states, with unsecured creditors standing to lose the most. Using data on union elections covering several decades, we employ a regression discontinuity design to identify the effect of worker unionization on bondholders in bankruptcy states. Closely won union elections lead to significant bond value losses, especially when firms approach bankruptcy, have underfunded pension plans, and operate in non-RTW law states. Unionization is associated with longer, more convoluted, and costlier bankruptcy court proceedings. Unions further depress bondholders' recovery values as they are assigned seats on unsecured creditors' committees.

Suggested Citation

Campello, Murillo and Gao, Janet and Qiu, Jiaping and Zhang, Yue, Bankruptcy and the Cost of Organized Labor: Evidence from Union Elections (September 2017). NBER Working Paper No. w23869. Available at SSRN: https://ssrn.com/abstract=3046383

Murillo Campello (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

114 East Avenue
369 Sage Hall
Ithaca, NY 14853
United States

HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=mnc35

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138

Janet Gao

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

Jiaping Qiu

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Yue Zhang

Université catholique de Louvain - Louvain Finance and CORE ( email )

Place de l'Université 1
Louvain-la-Neuve, 1348
Belgium

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