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Effects of customer unionization on supplier relationships and supplier value

Author

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  • Kim, Hyemin

Abstract

This study examines whether suppliers modify trading strategies upon their customers’ unionization. The study demonstrates that when customers unionize, suppliers experience negative stock returns and rely less on the unionized customers for sales. Results are robust for alternatively using a regression discontinuity design. Suppliers reduce their exposure to unionized customers due to the demand uncertainty arising from potential labor disruptions, the customers’ reduced competitiveness in the product market, and customers’ potential shifting of unionization costs to suppliers. Furthermore, suppliers with unionized customers mitigate risks by seeking new customers and diversifying their customer concentration.

Suggested Citation

  • Kim, Hyemin, 2024. "Effects of customer unionization on supplier relationships and supplier value," Journal of Empirical Finance, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:empfin:v:78:y:2024:i:c:s0927539824000501
    DOI: 10.1016/j.jempfin.2024.101515
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    More about this item

    Keywords

    Transaction cost; Labor union; Supplier; Trading relationship;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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