The Bright Side of Unionization : The Case of Stock Price Crash Risk

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)Not applicablepeer-review

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Detail(s)

Original languageEnglish
Publication statusPublished - 12 Aug 2019

Conference

TitleAmerican Accounting Association Annual Meeting
Location
PlaceUnited States
CitySan Francisco
Period10 - 14 August 2019

Abstract

This study examines whether and how labor unionization influences stock price crash risk. Using a regression discontinuity design that employs union elections as an exogenous shock yielding local variation in unionization, we find that unionization leads to a significant decline in stock price crash risk. We further explore the underlying mechanisms through which unionization affects crash risk and find that labor unions constrain managerial resource diversion and overinvestment, demand less risk-taking, and facilitate transparent information flow, which in turn reduces crash risk. Overall, our results suggest that unions play an important governance role. Our study sheds new light on a formerly under-researched beneficial impact of unionization and the role that organized labor plays in influencing extreme downside risk in the equity market. 

Research Area(s)

  • unionization, stock price crash risk, governance

Bibliographic Note

Since this conference is yet to commence, the information for this record is subject to revision.

Citation Format(s)

The Bright Side of Unionization : The Case of Stock Price Crash Risk. / Kim, Jeong-Bon; Zhang, Eliza Xia; Zhong, Kai .

2019. Paper presented at American Accounting Association Annual Meeting, San Francisco, United States.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)Not applicablepeer-review