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The impact of strikes on shareholder equity

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Author Info
Brian E. Becker
Craig A. Olson
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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Publisher Info
Article provided by ILR Review, ILR School, Cornell University 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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  1. 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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
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