Labor Unions and Forms of Corporate Liquidity

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 sub-groups 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.