Labor unions and forms of corporate liquidity

© 2015 John Wiley & Sons LtdThis is the peer reviewed version of the following article: Tong, Z. (2015), Labor Unions and Forms of Corporate Liquidity. Journal of Business Finance & Accounting, 42: 1007–1039, which has been published in final form at doi: 10.1111/jbfa.12122.We examine how the presence of labor unions affects a firm’s choice of corporate liquidity between bank lines of credit and corporate cash holdings. We find that firms in industries with higher unionization rates hold a higher fraction of corporate liquidity in the form of bank lines of credit. We divide the firms into subgroups and find that this positive relationship holds for firms that are not in a state with right-to-work legislation and for firms that are financially constrained. Our findings are consistent with the hypothesis that a firm chooses the forms of corporate liquidity to take advantage of the bargaining benefits associated with bank lines of credit