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Bank's balance sheet management as a bargaining tool: Evidence from Brazilian labor strikes

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  • Behr, Patrick
  • Wang, Weichao
  • Adasi Manu, Sylvester

Abstract

We investigate whether and how banks adjust their financial positions in the wake of labor strikes. Using hand-collected data at the bank-municipality level in Brazil during 2006–2016, we find that banks significantly increase loan loss provisions, reduce loans disbursed, and hold less liquidity just before the bank labor strikes. These results are consistent with a bargaining hypothesis, suggesting that banks account for fewer current earnings, reduce expected cash flows, and reveal less cash and cash equivalents to labor unions before the anticipated strikes to counter the rent-seeking behavior of unions and strengthen their bargaining power in upcoming wage negotiations.

Suggested Citation

  • Behr, Patrick & Wang, Weichao & Adasi Manu, Sylvester, 2024. "Bank's balance sheet management as a bargaining tool: Evidence from Brazilian labor strikes," Emerging Markets Review, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:ememar:v:59:y:2024:i:c:s1566014123000997
    DOI: 10.1016/j.ememar.2023.101094
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    More about this item

    Keywords

    Banks; Balance sheet variables; Bargaining power; Earnings management; Strategic behavior; Labor union strikes;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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