Discussion paper

DP12595 Unionization, Cash, and Leverage

What is the effect of unionization on corporate financial policies? The average unionized firm responds with lower cash and higher leverage to a unionization election than the average firm escaping unionization. However, using a regression discontinuity design I find that the causal effect of unionization is close to zero on average, but heterogeneous across firms. For the subset of large and financially unconstrained firms, the causal effect is positive on leverage and negative on cash; the opposite is true for small and financially constrained firms. These results help reconcile controversially discussed views on how corporate finance and labor interact.


Schmalz, M (2018), ‘DP12595 Unionization, Cash, and Leverage‘, CEPR Discussion Paper No. 12595. CEPR Press, Paris & London. https://cepr.org/publications/dp12595