Debt as Threat: Evidence from Union-Sponsored Shareholder Proposals

Source: Alberta Di Giuli, Arthur Petit-Romec, Last revised: December 22, 2017

From the abstract:
This paper uses data on shareholder proposals to study how leverage affects the interaction between firms and labor unions. We find a negative association between financial leverage and shareholder proposals sponsored by unions. Our results are consistent with the idea that capital structure affects labor unions’ behavior and suggest that debt deters labor unions from engaging in negotiation tactics. Additional tests indicate that the negative association between debt and union proposals is driven by governance proposals and more pronounced in firms in poorer financial condition. Our results also suggest that union proposals in firms with low level of debt are value destroying.