The Relationship between Bargaining Power of Labor Union and Cost of Capital
Sohn, Pando
This paper examines the impact of operating flexibility on firms¡¯ costs of equity by focusing on the constraints that labor unions impose on firms¡¯ operations using non-financial firms listed KSE from 1981 to 2012. It finds that the cost of equity is higher for firms in more unionized industries in portfolio analysis. The effect holds after we control for a host of industry- and firm-level characteristics, and is stronger when unions face amore favorable bargaining power. Findings in this paper are consistent with the view that labor unions increase firms¡¯ costs of equity by decreasing firms¡¯ operating flexibility.
Labor Union,Collective Bargaining Power,Operating Flexibility,Cost of Capital
[ 07327 ] 67-8, Yeouinaru-ro, Yeongdeungpo-gu, Seoul, Korea TEL. +82-2-2003-9921 FAX. +82-2-2003-9979 E-mail. office@korfin.org COPYRIGHT(C) SINCE 1987 KOREAN FINANCE ASSOCIATION. All rights reserved.