Labor unions, bargaining power and corporate bond yield spreads: Structural credit model perspectives

Tsung-Kang Chen, Yan Shing Chen, Hsien Hsing Liao*

*Corresponding author for this work

Research output: Contribution to journalArticle

20 Scopus citations

Abstract

This study investigates labor union effects on bond yield spreads from perspectives of structural credit models by employing American bond observations from 2001 to 2007. This research finds that union strength significantly and positively relates to bond yield spreads (this effect is roughly equal to that of issuer rating for one standard deviation change when controlling for well-known variables). The empirical results also show that the positive effects become weaker when management has higher bargaining power. Additionally, union strength volatility significantly and negatively relates to bond yield spreads and capital structure (leverage). The above results are robust when controlling for credit ratings, collinearity concerns, industry effect and tax effect.

Original languageEnglish
Pages (from-to)2084-2098
Number of pages15
JournalJournal of Banking and Finance
Volume35
Issue number8
DOIs
StatePublished - 1 Aug 2011

Keywords

  • Bargaining power
  • Bond yield spreads
  • Credit risk
  • Labor union
  • Structural credit model

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