Prof. Marcin Kacperczyk from UBC is giving a VGSF research seminar on "Labor Unions, Operating Leverage, and Expected Stock Returns" on MONDAY, October 16th, from 16:30 to 18:00 at the WU Wien (UZA 4, Nordbergstrasse 15, 1090 Wien, Room D204, 2. Obergeschoß, see http://www.wu-wien.ac.at/portal/ueber_wu/standorte/lageplan4 for a detailed plan). Please find the paper's abstract below.

Marcin is going to be in Vienna on Monday. If you like to meet him and to discuss your research with him, please contact Michael Halling (michael.halling@univie.ac.at).

Best, Michael Halling

Abstract We examine the effect of an important friction in the labor market, that generated by labor unions, on the cross-section of expected stock returns. We hypothesize that labor unions increase expected stock returns by increasing firms’ share of fixed labor costs in total labor costs and thus their operating leverage. Consistent with our hypothesis, we find that expected returns are higher for firms in more unionized industries and that the effect is stronger when unions face a more favorable bargaining environment. Furthermore, using instrumental-variables techniques we establish a causal link from unionization to expected returns. Finally, we provide evidence that unions increase expected returns through the operating leverage channel. Overall, our findings underline the importance of labor markets’ imperfections in understanding cross-sectional variation in expected returns.