The authors study the impact of a powerful nonfinancial stakeholder—unionized workers—on the pricing of corporate debt. Firms in more unionized industries have lower bond yields. This relation is stronger in firms with weaker financial conditions and cannot be explained by the correlation of unionization with industry characteristics, governance mechanisms, or financial leverage. Firms in unionized industries implement less risky investment policies and are less likely targets of acquisitions. Unionization reduces yields by more when firms’ takeover barriers are lower. Hence, unions are viewed favorably in the bond market because, through their influence on corporate affairs, they protect bondholders’ wealth.

Investment-cash flow sensitivity has declined and disappeared, even during the 2007–2009 credit crunch. If one believes that financial constraints have not disappeared, then investment-cash flow sensitivity cannot be a good measure of financial constraints. The decline and disappearance are robust to considerations of R&D and cash reserves, and across groups of firms. The information content in cash flow regarding investment opportunities has declined, but measurement error in Tobin's q does not completely explain the patterns in investment-cash flow sensitivity. The decline and disappearance cannot be explained by changes in sample composition, corporate governance, or market power—and remain a puzzle.