Asset specificity, unionization and the firm’s use of debt

Negotiating with Labor under Financial Distress

“…Similarly, using firm-level data, Hanka (1998) finds that debt is negatively correlated with wages, employment and pension funding. Further, Hirsch (1991) and Cavanaugh and Garen (1997) find evidence that leverage is positively correlated with unionization rates. However, while making important empirical contributions, the results reported in these papers may be driven by an omitted variables bias in which industries with higher unionization rates also have higher debt capacity for reasons unrelated to management-labor bargaining.…”

Hard debt, soft CEOs, and union rents

“…Cronquvist et al (2009) lend some support to hypotheses 5 and 6. Hypothesis 7 has been for the most part confirmed by Bronars and Deere (1991, 1993), Cavanaugh and Garen (1997) and Matsa (2010) who find that unionized firms tend to have higher debt‐to‐value ratios.…”

Capital Structure and a Firm's Workforce

“…The relation shown in Figure 2 is consistent with other cross-sectional analyses. Bronars & Deere (1991), Hirsch (1991), and Matsa (2010) show that unionization rates are correlated with financial leverage at the industry and firm levels, while Cavanaugh & Garen (1997) show that the correlation increases with rough proxies for the specificity of a firm's assets. However, these results may be affected by omitted variable bias: unions are more likely to organize in established, profitable firms and industries, which may also have a greater capacity for debt.…”