Bankruptcy and the Cost of Organized Labor: Evidence from Union Elections

Murillo Campello, Janet Gao, Jiaping Qiu and Yue Zhang

No 23869, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Unionized workers are entitled to special treatment in bankruptcy court. This can be detrimental to other corporate stakeholders in default states, with unsecured creditors standing to lose the most. Using data on union elections covering several decades, we employ a regression discontinuity design to identify the effect of worker unionization on bondholders in bankruptcy states. Closely won union elections lead to significant bond value losses, especially when firms approach bankruptcy, have underfunded pension plans, and operate in non-RTW law states. Unionization is associated with longer, more convoluted, and costlier bankruptcy court proceedings. Unions further depress bondholders' recovery values as they are assigned seats on unsecured creditors' committees.

JEL-codes: G32 G33 J51 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-cfn, nep-lab and nep-law
Note: CF LS
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Citations: View citations in EconPapers (3)

Published as Murillo Campello & Janet Gao & Jiaping Qiu & Yue Zhang, 2018. "Bankruptcy and the Cost of Organized Labor: Evidence from Union Elections," The Review of Financial Studies, vol 31(3), pages 980-1013.

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