The Economic Consequences of Labor Unionization: Evidence from Stock Price Crash Risk

Jun Chen, Jamie Y. Tong, Wenming Wang, Feida Zhang*

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    16 Citations (Scopus)

    Abstract

    This study investigates the impact of labor unionization on stock price crash risk. We find that labor unionization is negatively associated with stock price crash risk. Such negative relation is more pronounced when firms can intimate more credible evidence on unfavorable prospects and when firms face more powerful labor unions. Our findings are consistent with the notion that firms take strategic actions to reduce the bargaining advantages enjoyed by labor unions and that labor unions force firms to take less risky investments and discontinue underperformed projects more timely, which leads to lower stock price crash risk.

    Original languageEnglish
    Pages (from-to)775-796
    Number of pages22
    JournalJournal of Business Ethics
    Volume157
    Issue number3
    DOIs
    Publication statusPublished - 15 Jul 2019

    Scopus Subject Areas

    • Business and International Management
    • Business, Management and Accounting(all)
    • Arts and Humanities (miscellaneous)
    • Economics and Econometrics
    • Law

    User-Defined Keywords

    • Bargaining position
    • Crash risk
    • Labor unions
    • Risk aversion

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