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

Jun Chen (), Jamie Y. Tong (), Wenming Wang () and Feida Zhang ()
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Jun Chen: Zhejiang University
Jamie Y. Tong: University of Western Australia
Wenming Wang: Hong Kong Baptist University
Feida Zhang: Murdoch University

Journal of Business Ethics, 2019, vol. 157, issue 3, 775-796

Abstract: 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: Labor unions; Bargaining position; Crash risk; Risk aversion (search for similar items in EconPapers)
JEL-codes: G14 G30 G32 J52 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:kap:jbuset:v:157:y:2019:i:3:d:10.1007_s10551-017-3686-0