The (Non-) Effect of Labor Unionization on Firm Risk: Evidence From the Options Market

50 Pages Posted: 17 Dec 2018 Last revised: 21 Dec 2020

See all articles by Mohamed Ghaly

Mohamed Ghaly

Lancaster University - Department of Accounting and Finance

Alexandros Kostakis

University of Liverpool Management School; University of Manchester - Manchester Business School

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School

Date Written: December 1, 2020

Abstract

Labor unionization has no causal effect on firm risk. Using a regression discontinuity design to study the impact of labor union elections on option-implied firm risk, we find that unionization per se does not affect investor perceptions about firm price, tail, or variance risk. This finding is robust to studying very short (5-trading day) and long (up to 2-year) windows around the elections. Moreover, there is no unionization effect on firm risk either in subsets of firms facing strong union bargaining power, or with characteristics that prior literature identifies as important determinants of the effect of unionization on firm outcomes.

Keywords: Unionization, Labor Power, Option-Implied Firm Risk, Regression Discontinuity Design

JEL Classification: J51, G30, G32

Suggested Citation

Ghaly, Mohamed and Kostakis, Alexandros and Stathopoulos, Konstantinos, The (Non-) Effect of Labor Unionization on Firm Risk: Evidence From the Options Market (December 1, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3291555 or http://dx.doi.org/10.2139/ssrn.3291555

Mohamed Ghaly

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Bailrigg
Lancaster, LA1 4YX
United Kingdom
+44 (0)1524 594526 (Phone)

Alexandros Kostakis

University of Liverpool Management School ( email )

Chatham Building
Liverpool, L69 7ZH
United Kingdom

HOME PAGE: http://www.alexkostakis.com

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Konstantinos Stathopoulos (Contact Author)

The University of Manchester - Alliance Manchester Business School ( email )

AMBS Building
Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 275 6863 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.research.manchester.ac.uk/portal/K.Stathopoulos.html

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