IDEAS home Printed from https://ideas.repec.org/a/eee/jfinec/v173y2025ics0304405x25001655.html

Resilience in collective bargaining

Author

Listed:
  • Avenancio-León, Carlos F.
  • Piccolo, Alessio
  • Pinto, Roberto

Abstract

A central finding of the theoretical literature on bargaining is that parties’ attitudes towards delay influence bargaining outcomes. However, the ability to endure delays, resilience, is often private information and hard to measure in most real-world contexts. In the context of collective bargaining, we show firms actively attempt to become financially resilient in anticipation of labor negotiations. Firms adjust their financial resilience to respond to the passage of right-to-work laws (RWLs). Unions’ financial structure also responds to RWLs. Our findings suggest resilience is key to understanding the process through which collective bargaining determines wages.

Suggested Citation

  • Avenancio-León, Carlos F. & Piccolo, Alessio & Pinto, Roberto, 2025. "Resilience in collective bargaining," Journal of Financial Economics, Elsevier, vol. 173(C).
    • Handle: RePEc:eee:jfinec:v:173:y:2025:i:c:s0304405x25001655
    DOI: 10.1016/j.jfineco.2025.104157
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X25001655
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jfineco.2025.104157?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Agrawal, Ashwini K. & Matsa, David A., 2013. "Labor unemployment risk and corporate financing decisions," Journal of Financial Economics, Elsevier, vol. 108(2), pages 449-470.
    2. repec:bla:jfinan:v:43:y:1988:i:3:p:567-91 is not listed on IDEAS
    3. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
    4. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    5. Kathryn E. Spier, 1992. "The Dynamics of Pretrial Negotiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 93-108.
    6. Xavier Giroud & Holger M. Mueller, 2017. "Firm Leverage, Consumer Demand, and Employment Losses during the Great Recession," Working Papers 17-01, Center for Economic Studies, U.S. Census Bureau.
    7. Zhiguo He & Wei Xiong, 2012. "Rollover Risk and Credit Risk," Journal of Finance, American Finance Association, vol. 67(2), pages 391-430, April.
    8. Shleifer, Andrei & Vishny, Robert W, 1992. "Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, vol. 47(4), pages 1343-1366, September.
    9. Heider, Florian & Ljungqvist, Alexander, 2015. "As certain as debt and taxes: Estimating the tax sensitivity of leverage from state tax changes," Journal of Financial Economics, Elsevier, vol. 118(3), pages 684-712.
    10. David S. Lee & Alexandre Mas, 2012. "Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961--1999," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 333-378.
    11. Claudio Michelacci & Vincenzo Quadrini, 2005. "Borrowing from Employees: Wage Dynamics with Financial Constraints," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 360-369, 04/05.
    12. Kirill Borusyak & Xavier Jaravel & Jann Spiess, 2024. "Revisiting Event-Study Designs: Robust and Efficient Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(6), pages 3253-3285.
    13. Stéphane Bonhomme & Kerstin Holzheu & Thibaut Lamadon & Elena Manresa & Magne Mogstad & Bradley Setzler, 2023. "How Much Should We Trust Estimates of Firm Effects and Worker Sorting?," Journal of Labor Economics, University of Chicago Press, vol. 41(2), pages 291-322.
    14. Melvyn G. Coles & Andrew K. G. Hildreth, 2000. "Wage Bargaining, Inventories, and Union Legislation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 273-293.
    15. PETER M. DeMARZO & YULIY SANNIKOV, 2006. "Optimal Security Design and Dynamic Capital Structure in a Continuous‐Time Agency Model," Journal of Finance, American Finance Association, vol. 61(6), pages 2681-2724, December.
    16. Thomas J. Holmes, 2006. "Geographic Spillover of Unionism," NBER Working Papers 12025, National Bureau of Economic Research, Inc.
    17. Douglas W. Diamond, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 709-737.
    18. Matthew Serfling, 2016. "Firing Costs and Capital Structure Decisions," Journal of Finance, American Finance Association, vol. 71(5), pages 2239-2286, October.
    19. Nicole M. Fortin & Thomas Lemieux & Neil Lloyd, 2023. "Right-to-Work Laws, Unionization, and Wage Setting," Research in Labor Economics, in: 50th Celebratory Volume, volume 50, pages 285-325, Emerald Group Publishing Limited.
    20. David Card & Thomas Lemieux & W. Craig Riddell, 2003. "Unionization and Wage Inequality: A Comparative Study of the U.S, the U.K., and Canada," NBER Working Papers 9473, National Bureau of Economic Research, Inc.
    21. Xavier Giroud & Holger M. Mueller, 2017. "Firm Leverage, Consumer Demand, and Employment Losses During the Great Recession," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(1), pages 271-316.
    22. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    23. Stephen G. Bronars & Donald R. Deere, 1991. "The Threat of Unionization, the Use of Debt, and the Preservation of Shareholder Wealth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 231-254.
    24. Dilip Abreu & Faruk Gul, 2000. "Bargaining and Reputation," Econometrica, Econometric Society, vol. 68(1), pages 85-118, January.
    25. David Card & Thomas Lemieux & W. Craig Riddell, 2004. "Unions and Wage Inequality," Journal of Labor Research, Transaction Publishers, vol. 25(4), pages 519-562, October.
    26. Ellul, Andrew & Pagano, Marco, 2019. "Corporate leverage and employees’ rights in bankruptcy," Journal of Financial Economics, Elsevier, vol. 133(3), pages 685-707.
    27. Flannery, Mark J, 1986. "Asymmetric Information and Risky Debt Maturity Choice," Journal of Finance, American Finance Association, vol. 41(1), pages 19-37, March.
    28. Benmelech, Efraim & Frydman, Carola & Papanikolaou, Dimitris, 2019. "Financial frictions and employment during the Great Depression," Journal of Financial Economics, Elsevier, vol. 133(3), pages 541-563.
    29. repec:eme:rlec11:s0147-912120230000050011 is not listed on IDEAS
    30. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    31. Heckman, James & Pinto, Rodrigo, 2024. "Econometric causality: The central role of thought experiments," Journal of Econometrics, Elsevier, vol. 243(1).
    32. Perotti, Enrico C & Spier, Kathryn E, 1993. "Capital Structure as a Bargaining Tool: The Role of Leverage in Contract Renegotiation," American Economic Review, American Economic Association, vol. 83(5), pages 1131-1141, December.
    33. Baker, Andrew C. & Larcker, David F. & Wang, Charles C.Y., 2022. "How much should we trust staggered difference-in-differences estimates?," Journal of Financial Economics, Elsevier, vol. 144(2), pages 370-395.
    34. David A. Matsa, 2010. "Capital Structure as a Strategic Variable: Evidence from Collective Bargaining," Journal of Finance, American Finance Association, vol. 65(3), pages 1197-1232, June.
    35. Henry S Farber & Daniel Herbst & Ilyana Kuziemko & Suresh Naidu, 2021. "Unions and Inequality over the Twentieth Century: New Evidence from Survey Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(3), pages 1325-1385.
    36. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    37. Steven E. Abraham & Paula B. Voos, 2000. "Right-to-Work Laws: New Evidence from the Stock Market," Southern Economic Journal, Southern Economic Association, vol. 67(2), pages 345-362, July.
    38. Jonathan B. Berk & Richard Stanton & Josef Zechner, 2010. "Human Capital, Bankruptcy, and Capital Structure," Journal of Finance, American Finance Association, vol. 65(3), pages 891-926, June.
    39. Bena, Jan & Ortiz-Molina, Hernán & Simintzi, Elena, 2022. "Shielding firm value: Employment protection and process innovation," Journal of Financial Economics, Elsevier, vol. 146(2), pages 637-664.
    40. Doruk Cengiz & Arindrajit Dube & Attila Lindner & Ben Zipperer, 2019. "The Effect of Minimum Wages on Low-Wage Jobs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1405-1454.
    41. Robert E. Hall & Alan B. Krueger, 2012. "Evidence on the Incidence of Wage Posting, Wage Bargaining, and On-the-Job Search," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 56-67, October.
    42. Efraim Benmelech & Nittai K. Bergman & Ricardo J. Enriquez, 2012. "Negotiating with Labor under Financial Distress," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 1(1), pages 28-67.
    43. Donangelo, Andres & Gourio, François & Kehrig, Matthias & Palacios, Miguel, 2019. "The cross-section of labor leverage and equity returns," Journal of Financial Economics, Elsevier, vol. 132(2), pages 497-518.
    44. John R. Graham & Hyunseob Kim & Si Li & Jiaping Qiu, 2023. "Employee Costs of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 78(4), pages 2087-2137, August.
    45. Reder, Melvin W & Neumann, George R, 1980. "Conflict and Contract: The Case of Strikes," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 867-886, October.
    46. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-1150, September.
    47. Jennifer Brown & David A. Matsa, 2016. "Boarding a Sinking Ship? An Investigation of Job Applications to Distressed Firms," Journal of Finance, American Finance Association, vol. 71(2), pages 507-550, April.
    48. Ma, Ching-To Albert & Manove, Michael, 1993. "Bargaining with Deadlines and Imperfect Player Control," Econometrica, Econometric Society, vol. 61(6), pages 1313-1339, November.
    49. Ellwood, David T & Fine, Glenn, 1987. "The Impact of Right-to-Work Laws on Union Organizing," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 250-273, April.
    50. Klasa, Sandy & Ortiz-Molina, Hernán & Serfling, Matthew & Srinivasan, Shweta, 2018. "Protection of trade secrets and capital structure decisions," Journal of Financial Economics, Elsevier, vol. 128(2), pages 266-286.
    51. Paul Beaudry & David A. Green & Benjamin Sand, 2012. "Does Industrial Composition Matter for Wages? A Test of Search and Bargaining Theory," Econometrica, Econometric Society, vol. 80(3), pages 1063-1104, May.
    52. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-637, May.
    53. William J. Moore & Robert J. Newman, 1985. "The Effects of Right-to-Work Laws: A Review of the Literature," ILR Review, Cornell University, ILR School, vol. 38(4), pages 571-585, July.
    54. Marcus M. Opp & John Y. Zhu, 2015. "Impatience versus Incentives," Econometrica, Econometric Society, vol. 83(4), pages 1601-1617, July.
    55. Steven E. Abraham & Paula B. Voost, 2000. "Right‐to‐Work Laws: New Evidence from the Stock Market," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 345-362, October.
    56. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
    57. Chava, Sudheer & Danis, András & Hsu, Alex, 2020. "The economic impact of right-to-work laws: Evidence from collective bargaining agreements and corporate policies," Journal of Financial Economics, Elsevier, vol. 137(2), pages 451-469.
    58. Patricia M. Dechow & Richard G. Sloan & Mark T. Soliman, 2004. "Implied Equity Duration: A New Measure of Equity Risk," Review of Accounting Studies, Springer, vol. 9(2), pages 197-228, June.
    59. Andrew Ellul & Cong Wang & Kuo Zhang, 2024. "Labor Unemployment Risk and CEO Incentive Compensation," Management Science, INFORMS, vol. 70(2), pages 885-906, February.
    60. Elena Simintzi & Vikrant Vig & Paolo Volpin, 2015. "Labor Protection and Leverage," The Review of Financial Studies, Society for Financial Studies, vol. 28(2), pages 561-591.
    61. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    62. Ryan Michaels & T Beau Page & Toni M Whited, 2019. "Labor and Capital Dynamics under Financing Frictions," Review of Finance, European Finance Association, vol. 23(2), pages 279-323.
    63. Yuriy Gorodnichenko & Michael Weber, 2016. "Are Sticky Prices Costly? Evidence from the Stock Market," American Economic Review, American Economic Association, vol. 106(1), pages 165-199, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Will Gornall & Oleg R. Gredil & Sabrina T. Howell & Xing Liu & Jason Sockin, 2025. "Do Employees Cheer for Private Equity? The Heterogeneous Effects of Buyouts on Job Quality," Management Science, INFORMS, vol. 71(5), pages 4287-4317, May.
    2. Cho, DuckKi & Choi, Lyungmae, 2024. "Shadow union in local labor markets and corporate financing policies," Journal of Corporate Finance, Elsevier, vol. 89(C).
    3. Pagano, Marco, 2020. "Risk Sharing Within the Firm: A Primer," Foundations and Trends(R) in Finance, now publishers, vol. 12(2), pages 117-198, October.
    4. Olga Kuzmina, 2023. "Employment Flexibility and Capital Structure: Evidence from a Natural Experiment," Management Science, INFORMS, vol. 69(9), pages 4992-5017, September.
    5. Gill, Balbinder Singh & Choi, Jongmoo Jay & John, Kose, 2024. "Firm leverage and employee pay: The moderating role of CEO leadership style," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    6. Li, Tongxia & Lu, Chun & Xu, Lei, 2025. "Access to finance and cost stickiness: Evidence from anti-recharacterization laws," Advances in accounting, Elsevier, vol. 68(C).
    7. Qian, Zhenjie & Xi, Dan & Xu, Jia & Zhou, Lingrui, 2026. "Deleveraging driven by profitability improvement: Evidence from China’s business tax to value-added tax transition," Journal of Empirical Finance, Elsevier, vol. 85(C).
    8. Fung, Hung-Gay & Li, Tongxia & Lu, Chun & Wen, Min-Ming, 2025. "The inevitable disclosure doctrine: A facade or a curse in the CEO labor market," Journal of Banking & Finance, Elsevier, vol. 179(C).
    9. José Marcelo Cardoso de Lima Filho & Michel Alexandre & João Frois Caldeira, 2026. "Credit Supply Shocks and the Moderating Effects of Leverage on Employment and Wages in Brazil," Working Papers Series 648, Central Bank of Brazil, Research Department.
    10. David A. Matsa, 2018. "Capital Structure and a Firm’s Workforce," NBER Working Papers 25125, National Bureau of Economic Research, Inc.
    11. Jozef Konings & Aaron Putseys, 2026. "The impact of on-the-job training subsidies on firm-level outcomes: evidence from Flemish SMEs," Small Business Economics, Springer, vol. 66(3), pages 977-1003, March.
    12. Chino, Atsushi, 2025. "Negative effects of delayed retirement: Employment protection of older workers and firm value," Journal of Corporate Finance, Elsevier, vol. 95(C).
    13. Ellul, Andrew & Pagano, Marco, 2019. "Corporate leverage and employees’ rights in bankruptcy," Journal of Financial Economics, Elsevier, vol. 133(3), pages 685-707.
    14. Karpuz, Ahmet & Luo, Di & Xiao, Rongbing & Zhao, Huainan, 2023. "The effect of labour protection laws on the relationship between leverage and wages," Journal of Banking & Finance, Elsevier, vol. 148(C).
    15. Chava, Sudheer & Danis, András & Hsu, Alex, 2020. "The economic impact of right-to-work laws: Evidence from collective bargaining agreements and corporate policies," Journal of Financial Economics, Elsevier, vol. 137(2), pages 451-469.
    16. Schmalz, Martin, 2018. "Unionization, Cash, and Leverage," CEPR Discussion Papers 12595, Centre for Economic Policy Research.
    17. Ee, Mong Shan & Huang, He & Cheng, Mingying, 2023. "Do labor mobility restrictions affect debt maturity?," Journal of Financial Stability, Elsevier, vol. 66(C).
    18. Halford, Joseph T. & Hayes, Rachel M. & Sibilkov, Valeriy, 2024. "Personal bankruptcy costs, union bargaining power, and capital structure," Journal of Banking & Finance, Elsevier, vol. 168(C).
    19. Rania Gihleb & Osea Giuntella & Jian Qi Tan, 2024. "The impact of right‐to‐work laws on long hours and work schedules," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 43(3), pages 696-713, June.
    20. Nguyen, Justin Hung & Qiu, Buhui, 2022. "Right-to-Work laws and corporate innovation," Journal of Corporate Finance, Elsevier, vol. 76(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfinec:v:173:y:2025:i:c:s0304405x25001655. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.