The impact of labor unions on investment-cash flow sensitivity

► We examine how labor unions affect investment-cash flow sensitivity in a US sample. ► Unionized firms are associated with higher investment-cash flow sensitivity. ► The union effect holds when we control for other proxies of financial constraints. ► The union effect is associated with firms' incentive to reduce liquidity and thereby enhance bargaining power. ► The union effect is stronger when firms are negotiating new contracts with unions.