Abstract
This paper examines whether labor unions affect the bank performance during recently financial crisis. The empirical evidence from 228 largest banks around the globe indicate that the buy-and-hold returns of unionized banks are higher and the default probabilities are lower during the crisis period when compared non-unionized banks. In addition, unionized banks experience a larger increase in tier 1 capital ratio in crisis years and have lower leverage ratio and tail risk in the pre-crisis year. These results suggest that banks adopt less risky investment and lending policies to accommodate the preference of unionized labor.
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