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Asian Review of Financial Research, Vol., No..
pp.411~464
pp.411~464
Effects of customer unionization on supplier relationships and supplier value
Hyemin Kim Department of Finance, School of Business, Hanyang University, Seoul, South Korea
I examine whether suppliers modify trading strategies upon their customers¡¯ unionization. I demonstrate that when customers unionize, suppliers experience negative stock returns and rely less on the unionized customers for sales. Results are robust to alternatively using a regression discontinuity design. Suppliers reduce their exposure to unionized customers due to the demand uncertainty arising from potential labor disruptions, the customers¡¯ reduced competitiveness in the product market, and customers¡¯ potential shifting of unionization costs to suppliers. However, in certain cases, customer unionization mitigates the negative effect of customers¡¯ default risk on their relationship with suppliers.
Hyemin Kim
I examine whether suppliers modify trading strategies upon their customers¡¯ unionization. I demonstrate that when customers unionize, suppliers experience negative stock returns and rely less on the unionized customers for sales. Results are robust to alternatively using a regression discontinuity design. Suppliers reduce their exposure to unionized customers due to the demand uncertainty arising from potential labor disruptions, the customers¡¯ reduced competitiveness in the product market, and customers¡¯ potential shifting of unionization costs to suppliers. However, in certain cases, customer unionization mitigates the negative effect of customers¡¯ default risk on their relationship with suppliers.