Working Paper: NBER ID: w23869
Authors: Murillo Campello; Janet Gao; Jiaping Qiu; Yue Zhang
Abstract: Unionized workers are entitled to special treatment in bankruptcy court. This can be detrimental to other corporate stakeholders in default states, with unsecured creditors standing to lose the most. Using data on union elections covering several decades, we employ a regression discontinuity design to identify the effect of worker unionization on bondholders in bankruptcy states. Closely won union elections lead to significant bond value losses, especially when firms approach bankruptcy, have underfunded pension plans, and operate in non-RTW law states. Unionization is associated with longer, more convoluted, and costlier bankruptcy court proceedings. Unions further depress bondholders' recovery values as they are assigned seats on unsecured creditors' committees.
Keywords: No keywords provided
JEL Codes: G32; G33; J51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased bankruptcy costs (K35) | decline in bond values (G12) |
| union representatives assigned to unsecured creditors committees (J51) | bondholders' recovery values (G33) |
| worker unionization (J51) | bondholders' wealth in bankruptcy (G33) |
| closely won union elections (J51) | decline in bond values (G12) |
| unionization (J50) | prolonged bankruptcy proceedings (G33) |
| unionization (J50) | higher in-court expenses (K41) |