Abstract We examine whether natural disaster experiences affect households’ portfolio choice decisions. Using data from the National Longitudinal Survey of Youth 1979, we find that adversely affected households are less likely to participate in risky asset markets. After a disaster shock, households become more risk-averse and lower their expectations on future stock market returns. Such conservative portfolio choices persist even after households relocate to less disaster-prone areas, consistent with risk preferences being altered by disaster experiences. Overall, our evidence suggests that transient but salient experiences can be an important factor in explaining the limited participation puzzle.

This paper identifies an externality of a firm’s unionization that affects the financing decisions of non-unionized firms within a local labor market. We find that non-unionized firms increase their leverage ratios and hold less cash reserves following a union victory at other firms. This “shadow union” effect manifests through the heightened threat of unionization following shadow union organizing. Specifically, the effect is more pronounced when the probability of unionization rises by a larger margin and non-union firms face higher union rents conditional on being unionized. The threat appears credible enough to shape corporate financing decisions: shadow unions raise employees’ wages and the likelihood of subsequent union victories in the local labor market. Additional results indicate that the shadow union effect is distinct from leverage-mimicking behavior. Overall, our findings suggest that shadow labor market institutions create a strategic incentive for non-unionized firms to adopt less conservative financial policies to combat the union threat.