DuckKi Cho

Using data from the National Longitudinal Survey of Youth 1979, we find that households who were adversely affected by natural disasters are less likely to participate in risky asset markets. After a disaster shock, households become more risk-averse and lower their expectations of future stock market returns. Our evidence suggests that transient but salient experiences can be an important factor in explaining the limited stock market participation puzzle.

This paper investigates whether employees in conjunction with their professional networks function as information intermediaries. Collectively, employees have access to value-relevant information that can be distributed through both their direct professional contacts and the contacts of their contacts. We find that firms with more highly connected employees have lower market reactions around earnings announcements. The transmitted information appears to be positive and firm-specific rather than negative and macroeconomic or industry-wide. We provide causal evidence using mergers of brokerage houses as a source of exogenous variation in the information environment. In addition, stock prices incorporate earnings-related information on a more-timely basis when employees are more connected: a smaller post earnings announcement drift and a greater intra-period timeliness metric before and around the earnings announcement. Overall, our findings suggest that employees and their professional connections play an important role as information intermediaries, thereby increasing the information efficiency of stock prices.

Declining worker bargaining power has been advanced as an explanation for major macroeconomic shifts in the U.S., such as declining labor share, reduced consumer purchasing power, and rising inequality. This paper explores microeconomic implications, focusing on the impact of declining worker power on firm-level investment responses to a labor cost shock arising from mandated minimum wage increases. Over four decades, we observe a shift in investment-wage sensitivities from negative to insignificant as management gains flexibility through enhanced outside options. This shift is more pronounced in firms that are more exposed to globalization, technological change, and declining unionization, reflecting broader trends in weakening worker power and its influence on corporate decision-making.

This paper identifies an externality of a firm's unionization that affects the financing decisions of other, non-unionized firms within a local labor market. We find that non-unionized firms increase their market leverage ratios by 1.8 to 2.0 percentage points following a union victory at other firms. As an alternative coping strategy, non-unionized firms also hold less cash reserves. This "shadow union" effect is more pronounced when the probability of unionization rises by a larger margin (e.g., when non-union firms have a larger fraction of middle-to-low wage workers or when shadow unions are formed multiple times in local labor markets). In addition, the effect is stronger when non-union firms face higher union rents conditional on being unionized (e.g., labor-intensive firms, firms located in states with lower unemployment rates, or firms operating in less competitive industries). These results are consistent with the heightened threat of unionization following shadow union organizing. Overall, our findings suggest that a shadow labor market institution creates a strategic incentive for non-unionized firms to use less conservative financial policies to combat the union threat.