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Unionization, Cash, and Leverage

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  • Schmalz, Martin

Abstract

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.

Suggested Citation

  • Schmalz, Martin, 2018. "Unionization, Cash, and Leverage," CEPR Discussion Papers 12595, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12595
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    Cited by:

    1. Moro, Andrea & Maresch, Daniela & Ferrando, Annalisa & Udell, Gregory F., 2017. "Does employment protection legislation affect credit access? Evidence from Europe," Working Paper Series 2063, European Central Bank.
    2. Murillo Campello & Janet Gao & Jiaping Qiu & Yue Zhang, 2017. "Bankruptcy and the Cost of Organized Labor: Evidence from Union Elections," NBER Working Papers 23869, National Bureau of Economic Research, Inc.
    3. Pezone, Vincenzo, 2017. "Unemployment Risk and Payout Policies," MPRA Paper 83918, University Library of Munich, Germany.

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    More about this item

    Keywords

    Capital structure; Cash; Risk management; Labor adjustment costs; Unionization; Regression discontinuity;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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