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Unionization and shareholder interests

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  • Brian E. Becker
  • Craig A. Olson
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    Abstract

    Drawing on agency theory, this study examines union-nonunion differences in the allocation of both firm profits and business risk to employees and shareholders. Using a sample of more than 1,000 large private sector firms, the authors find that over the period 1970-81 shareholders in unionized firms assumed less of the firm's business risk than shareholders in nonunion firms. This finding is interpreted as evidence that managers of unionized firms attempted to minimize agency costs by capitalizing on the incentive effects of risksharing. In addition, risk-adjusted returns to shareholders were lower in unionized firms than in nonunion firms. The authors view the relatively poor performance of union firms as a primary motivating factor behind the restructuring of the American industrial relations system during the period studied. (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): 42 (1989)
    Issue (Month): 2 (January)
    Pages: 246-261

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    Handle: RePEc:ilr:articl:v:42:y:1989:i:2:p:246-261

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    Cited by:
    1. Rafael Gomez & Konstantinos Tzioumis, 2006. "What Do Unions Do to Executive Compensation?," CEP Discussion Papers dp0720, Centre for Economic Performance, LSE.
    2. Patrice Laroche & Hristos Doucouliagos, 2009. "Unions and Profits: A meta-regression Analysis," Post-Print hal-00648569, HAL.

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