Bank’s Balance Sheet Management as a Bargaining Tool: Evidence from Brazilian Labor Strikes

Patrick Behr, Weichao WANG, Sylvester ADASI MANU

Research output: Contribution to journalArticlepeer-review

Abstract

We investigate whether and how banks adjust their financial positions in the wake of labor strikes. Using hand-collected data at the bank-municipality level in Brazil during 2006–2016, we find that banks significantly increase loan loss provisions, reduce loans disbursed, and hold less liquidity just before the bank labor strikes. These results are consistent with a bargaining hypothesis, suggesting that banks account for fewer current earnings, reduce expected cash flows, and reveal less cash and cash equivalents to labor unions before the anticipated strikes to counter the rent-seeking behavior of unions and strengthen their bargaining power in upcoming wage negotiations.
Original languageEnglish
Article number101094
Number of pages16
JournalEmerging Markets Review
Volume59
Issue number101094
DOIs
Publication statusPublished - 1 Mar 2024

Keywords

  • Banks
  • Balance sheet variables
  • Bargaining power
  • Earnings management
  • Strategic behavior
  • Labor union strikes

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