Asset specificity, unionization and the firm's use of debt

Joseph K. Cavanaugh and John Garen
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Joseph K. Cavanaugh: Wright State University, Celina, OH, USA, Postal: Wright State University, Celina, OH, USA
John Garen: University of Kentucky, Lexington, KY, USA, Postal: University of Kentucky, Lexington, KY, USA

Managerial and Decision Economics, 1997, vol. 18, issue 3, 255-269

Abstract: This paper considers the combined influence of asset specificity and unionization on the firm's use of debt. While previous literature tends to examine these effects separately, we find that the interaction of the two is critical. Thus, while asset specificity may reduce debt as in Williamson (1988), the presence of a strong union offsets this. Unionization increases the firm's debt as in Bronars and Deere (1991), but asset generality diminishes this effect. We model and test the interactive nature of these two effects. Using firm-specific unionization data and various proxies for asset specificity, we find support for our model. © 1997 John Wiley & Sons, Ltd.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:18:y:1997:i:3:p:255-269

DOI: 10.1002/(SICI)1099-1468(199705)18:3<255::AID-MDE820>3.0.CO;2-R

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