Union Concessions Following Asset Sales and Takeovers

The (non-) effect of labor unionization on firm risk: Evidence from the options market

“…In addition, Lie and Que (2019) document that union elections increase the probability of asset sales and render takeovers less likely, whereas Frandsen (2020) provides evidence that unionization sharply reduces employment, payroll, average worker earnings, and survival probability at the establishment level. on firm risk.…”

“…More generally, unions are expected to favor and promote financial policies that reduce the likelihood of default, inducing managers to choose lower financial leverage so as to reduce employees' exposure to unemployment risk and avoid the loss of firm-specific human capital, wages, and pension benefits (Berk et al, 2010). For example, unions may deter takeover activities (Dessaint et al, 2017;Lie and Que, 2019;Tian and Wang, 2020), which are typically associated with an increase in financial leverage.…”

“…First, recent studies argue for a causal effect of unionization on corporate outcomes and decision making. For example, Bradley et al (2017) show that unionization leads to a reduction to R&D expenditure and productivity of inventors whereas Lie and Que (2019) demonstrate that union elections increase the probability of asset sales and reduce the likelihood of takeovers. Collectively, these outcomes, as well as other potential changes to firm policies due to unionization not yet identified in the literature, could have an impact on the risk profile of unionized firms as long as they are meaningful and do not offset each other in terms of their aggregate effect on firm risk.…”