Unionization, Cash, and Leverage

49 Pages Posted: 22 Jan 2018

See all articles by Martin C. Schmalz

Martin C. Schmalz

University of Oxford - Finance; CEPR; CESifo; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2018


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.

Keywords: Capital Structure, cash, Labor Adjustment Costs, Regression Discontinuity, Risk management, Unionization

JEL Classification: G32, J50

Suggested Citation

Schmalz, Martin C., Unionization, Cash, and Leverage (January 2018). CEPR Discussion Paper No. DP12595, Available at SSRN: https://ssrn.com/abstract=3106798

Martin C. Schmalz (Contact Author)

University of Oxford - Finance ( email )

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CEPR ( email )

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CESifo ( email )

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European Corporate Governance Institute (ECGI) ( email )

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