The (Non-) Effect of Labor Unionization on Firm Risk : Evidence From the Options Market

Labor unionization has no causal effect on firm risk. Using a regression discontinuity design to study the impact of labor union elections on option-implied firm risk, we find that unionization per se does not affect investor perceptions about a firm's price, tail, or variance risk. This finding is robust to studying very short (5-trading day) and long (up to 2-year) windows around the elections, and making different assumptions about the timing of the resolution of uncertainty relating to the election outcome. Moreover, there is no unionization effect on firm risk either in subsets of firms located in states with strong union bargaining power, or with characteristics that prior literature identifies as important determinants of the effect of unionization on firm outcomes