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The impact of strikes on shareholder equity

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  • Brian E. Becker
  • Craig A. Olson
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    Abstract

    From an analysis of data for 1962-82, the authors find that strikes substantially affect shareholder equity as measured by the change in stock prices associated with strikes. Over that period the average strike involving 1,000 or more workers resulted in a 4.1% drop in shareholder equity, representing a decline of $72-87 million in 1980 dollars. Costs varied widely across industries. The authors also find that capital markets are usually able to anticipate whether an impending contract deadline will result in a strike or settlement. In the prestrike period, however, the stock market consistently underestimates the cost of a strike to shareholders, as evidenced by the fact that nearly two-thirds of the total decline in returns (2.7 percent) occurs after the strike is announced. (Abstract courtesy JSTOR.)

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    Bibliographic Info

    Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

    Volume (Year): 39 (1986)
    Issue (Month): 3 (April)
    Pages: 425-438

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    Handle: RePEc:ilr:articl:v:39:y:1986:i:3:p:425-438

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    Cited by:
    1. Martinello, F. & Hanrahan, R. & Kushner, J. & Masse, I., 1995. "The Effect of Work Stoppages on the Value of Firms in Canada," Working Papers 1995-04, Brock University, Department of Economics.
    2. MAULEON, Ana & VANNETELBOSCH, Vincent J., . "Bargaining with endogenous deadlines," CORE Discussion Papers RP -1719, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. David Lee & Alexandre Mas, 2009. "Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961-1999," NBER Working Papers 14709, National Bureau of Economic Research, Inc.
    4. Lin, Carl, 2011. "Give Me Your Wired and Your Highly Skilled: Measuring the Impact of Immigration Policy on Employers and Shareholders," IZA Discussion Papers 5754, Institute for the Study of Labor (IZA).
    5. Lin, Carl, 2012. "Less Myth, More Measurement: Decomposing Excess Returns from the 1989 Minimum Wage Hike," IZA Discussion Papers 6269, Institute for the Study of Labor (IZA).
    6. Chen, Tsung-Kang & Chen, Yan-Shing & Liao, Hsien-Hsing, 2011. "Labor unions, bargaining power and corporate bond yield spreads: Structural credit model perspectives," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2084-2098, August.
    7. John M. Abowd & George T. Milkovich & John M. Hannon, 1989. "The Effects of Human Resource Management Decisions on Shareholder Value," NBER Working Papers 3148, National Bureau of Economic Research, Inc.
    8. Martin B. Schmidt & David J. Berri, 2004. "The Impact of Labor Strikes on Consumer Demand: An Application to Professional Sports," American Economic Review, American Economic Association, vol. 94(1), pages 344-357, March.

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