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

Jun Chen; Jamie Y. Tong; Wenming Wang; Feida Zhang

doi:10.1007/s10551-017-3686-0

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 journal › Journal article › peer-review

23 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 language	English
Pages (from-to)	775-796
Number of pages	22
Journal	Journal of Business Ethics
Volume	157
Issue number	3
DOIs	https://doi.org/10.1007/s10551-017-3686-0
Publication status	Published - 15 Jul 2019

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 3 Good Health and Well-being

User-Defined Keywords

Bargaining position
Crash risk
Labor unions
Risk aversion

Access to Document

10.1007/s10551-017-3686-0

Cite this

@article{3f940e848b87467189ceac4b9d5216f7,

title = "The Economic Consequences of Labor Unionization: Evidence from Stock Price Crash Risk",

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.",

keywords = "Bargaining position, Crash risk, Labor unions, Risk aversion",

author = "Jun Chen and Tong, \{Jamie Y.\} and Wenming Wang and Feida Zhang",

note = "Funding Information: Jun Chen and Feida Zhang acknowledge financial support from the National Natural Science Foundation of China (Grant numbers: NSFC-71572181 and NSFC-71332004). Feida Zhang and Jamie Tong acknowledge the financial support from the MOE (Ministry of Education in China) Project of Humanities and Social Sciences (Grant No. 17YJA790012) and National Social Science Foundation of China (Grant No. 17BGL067). ",

year = "2019",

month = jul,

day = "15",

doi = "10.1007/s10551-017-3686-0",

language = "English",

volume = "157",

pages = "775--796",

journal = "Journal of Business Ethics",

issn = "0167-4544",

publisher = "Springer Netherlands",

number = "3",

}

TY - JOUR

T1 - The Economic Consequences of Labor Unionization

T2 - Evidence from Stock Price Crash Risk

AU - Chen, Jun

AU - Tong, Jamie Y.

AU - Wang, Wenming

AU - Zhang, Feida

N1 - Funding Information: Jun Chen and Feida Zhang acknowledge financial support from the National Natural Science Foundation of China (Grant numbers: NSFC-71572181 and NSFC-71332004). Feida Zhang and Jamie Tong acknowledge the financial support from the MOE (Ministry of Education in China) Project of Humanities and Social Sciences (Grant No. 17YJA790012) and National Social Science Foundation of China (Grant No. 17BGL067).

PY - 2019/7/15

Y1 - 2019/7/15

N2 - 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.

AB - 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.

KW - Bargaining position

KW - Crash risk

KW - Labor unions

KW - Risk aversion

UR - https://www.scopus.com/pages/publications/85028866782

U2 - 10.1007/s10551-017-3686-0

DO - 10.1007/s10551-017-3686-0

M3 - Journal article

AN - SCOPUS:85028866782

SN - 0167-4544

VL - 157

SP - 775

EP - 796

JO - Journal of Business Ethics

JF - Journal of Business Ethics

IS - 3

ER -

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

Abstract

UN SDGs

User-Defined Keywords

Access to Document

Other files and links

Fingerprint

Cite this