The strategic use of corporate cash holdings in collective bargaining with labor unions

Sandy Klasa, William F. Maxwell, Hernán Ortiz-Molina

Research output: Contribution to journalArticlepeer-review

191 Scopus citations


We provide evidence that firms in more unionized industries strategically hold less cash to gain bargaining advantages over labor unions and shelter corporate income from their demands. Specifically, we show that corporate cash holdings are negatively related with unionization. We also find that this relation is stronger for firms that are likely to place a higher value on gaining a bargaining advantage over unions and weaker for those firms in which lower cash holdings provide less credible evidence that a firm is unable to concede to union demands. Additionally, we show that for unionized firms increases in cash holdings raise the probability of a strike. Finally, we show that unionization decreases the market value of a dollar of cash holdings. Overall, our findings indicate that firms trade-off the benefits of corporate cash holdings with the costs resulting from a weaker bargaining position with labor.

Original languageEnglish (US)
Pages (from-to)421-442
Number of pages22
JournalJournal of Financial Economics
Issue number3
StatePublished - Jun 2009


  • Cash holdings
  • Corporate liquidity policy
  • Labor unions

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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