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 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.

This paper investigates whether employees and their professional networks act as information intermediaries. We find that firms with more-connected employees experience smaller market reactions to earnings surprises, and these results are not due to reverse causality or information inflows. Further analyses show that employees primarily disseminate private information about positive earnings news and the firm-specific component of earnings news, and are driven largely by the connections of mid-level managers. Consistent with social networking theory, the associations are stronger for weaker professional connections. Supporting employees’ role as information intermediaries, we find that the stock prices of more-connected firms incorporate information about forthcoming earnings more quickly, have more informative retail order imbalances, and exhibit lower post-earnings announcement drift. Overall, our results suggest that more-connected firms have more efficient stock prices due to employees and their professional networks acting as information intermediaries.

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.