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Labor Union Effect on Corporate Cash Holdings and Their Marginal Value

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  • Minshik Shin
  • Sooeun Kim
  • Jongho Shin
  • Jaeik Lee

Abstract

By using panel data from Korean listed firms, we find that unionized firms strategically hold less cash to enhance their bargaining power against labor unions. We also find that unionized firms are likely to reduce the marginal value of their cash holdings, thereby decreasing shareholder value from the agency theory perspective. This finding complements the agency theory argument that managers tend to waste corporate resources by hoarding cash, particularly when faced with increased information asymmetry and financial constraints. Overall, our results suggest that information-related financial constraints and agency problems are likely to co-exist in unionized firms.

Suggested Citation

  • Minshik Shin & Sooeun Kim & Jongho Shin & Jaeik Lee, 2018. "Labor Union Effect on Corporate Cash Holdings and Their Marginal Value," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(6), pages 1391-1413, May.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:6:p:1391-1413
    DOI: 10.1080/1540496X.2017.1289085
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    Cited by:

    1. Jiang, Xiandeng & Yang, Jin & Yang, Wei & Zhang, Jian, 2021. "Do employees’ voices matter? Unionization and corporate environmental responsibility," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 1265-1281.

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