Does unionization affect the manager–shareholder conflict? Evidence from firm-specific stock price crash risk
Journal of Corporate Finance, forthcoming; https://doi.org/10.1016/j.jcorpfin.2021.101991
68 Pages Posted: 11 Jun 2019 Last revised: 13 Jul 2022
Date Written: May 25, 2021
This study examines whether and how labor unionization influences firm-specific stock price crash risk. Using a regression discontinuity design that leverages locally exogenous variation in unionization generated by close union elections, we find that unionization leads to a significant decline in crash risk. We further explore the underlying mechanisms through which unionization affects crash risk and find that unions limit risk-taking, constrain overinvestment, and improve information flow, which in turn reduces crash risk. Overall, our study resolves some of the current debate over the implications of unions and sheds new light on their net impact on shareholder welfare.
Keywords: unionization, stock price crash risk, risk-taking, overinvestment, information flow
Suggested Citation: Suggested Citation