The Threat of Unionization, the Use of Debt, and the Preservation of Shareholder Wealth

S. G. Bronars; D. R. Deere

doi:10.2307/2937914

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The Threat of Unionization, the Use of Debt, and the Preservation of Shareholder Wealth

S. G. Bronars¹; D. R. Deere^2,3

¹ University of California, Santa Barbara · ² Mitchell Institute · ³ Texas A&M University

Quarterly Journal of Economics 1991

This paper argues that firms use debt to protect the wealth of shareholders from the threat of unionization. Under U. S. labor law the firm cannot prohibit its workers from attempting to form a collective bargaining unit. Debt policy offers a method of reducing the impact of this monopoly right on shareholders. By issuing debt, the firm credibly reduces the funds that are available to a potential union. Empirical evidence that strongly supports this hypothesis is presented.

DOI: 10.2307/2937914
Volume: 106 (1)
Pages: 231-254
Language: en
Export: BibTeX
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