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Do Nonfinancial Stakeholders Affect the Pricing of Risky Debt? Evidence from Unionized Workers

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Author Info

  • Huafeng (JASON) Chen
  • Marcin Kacperczyk
  • Hernán Ortiz-Molina

Abstract

The authors study the impact of a powerful nonfinancial stakeholder--unionized workers--on the pricing of corporate debt. Firms in more unionized industries have lower bond yields. This relation is stronger in firms with weaker financial conditions and cannot be explained by the correlation of unionization with industry characteristics, governance mechanisms, or financial leverage. Firms in unionized industries implement less risky investment policies and are less likely targets of acquisitions. Unionization reduces yields by more when firms' takeover barriers are lower. Hence, unions are viewed favorably in the bond market because, through their influence on corporate affairs, they protect bondholders' wealth. Copyright 2011, Oxford University Press.

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Bibliographic Info

Article provided by European Finance Association in its journal Review of Finance.

Volume (Year): 16 (2011)
Issue (Month): 2 ()
Pages: 347-383

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Handle: RePEc:oup:revfin:v:16:y:2011:i:2:p:347-383

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Cited by:
  1. Rui Silva, 2013. "Internal Labor Markets And Investment In Conglomerates," Working Papers 13-26, Center for Economic Studies, U.S. Census Bureau.
  2. Berg, Florian & Le Pen, Yannick, 2013. "Do corporate bond and credit default swap markets value environmental, social or corporate governance events?," Economics Papers from University Paris Dauphine 123456789/11380, Paris Dauphine University.
  3. Ginglinger, Edith & Megginson, William & Waxin, Timothée, 2011. "Employee ownership, board representation, and corporate financial policies," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 868-887, September.
  4. Anginer, Deniz & Warburton, A. Joseph, 2010. "The Chrysler effect : the impact of the Chrysler bailout on borrowing costs," Policy Research Working Paper Series 5462, The World Bank.

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