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Does the Political Power of Nonfinancial Stakeholders Affect Firm Values? Evidence from Labor Unions

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  • Stanfield, Jared
  • Tumarkin, Robert

Abstract

Whereas corporate political connections are known to enhance equity values, we demonstrate that union political activity can have the opposite effect. We examine the consequences of a recent Australian state law that restricts union political activity but does not change collective bargaining rights. In the wake of this law, the equity values of affected unionized firms significantly increase, and consistent with this market reaction, these firms are able to bargain for more favorable labor contracts than their unionized peers in other states. The evidence strongly suggests that unions use political activism to extract rents from shareholders and benefit their members.

Suggested Citation

  • Stanfield, Jared & Tumarkin, Robert, 2018. "Does the Political Power of Nonfinancial Stakeholders Affect Firm Values? Evidence from Labor Unions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 53(3), pages 1101-1133, June.
    • Handle: RePEc:cup:jfinqa:v:53:y:2018:i:03:p:1101-1133_00
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    Cited by:

    1. Liu, Chelsea, 2021. "CEO gender and employee relations: Evidence from labor lawsuits," Journal of Banking & Finance, Elsevier, vol. 128(C).
    2. Di Giuli, Alberta & Matta, Rafael & Romec, Arthur, 2023. "Capital structure and reversible bargaining tools: Evidence from union-sponsored shareholder proposals," Journal of Banking & Finance, Elsevier, vol. 149(C).
    3. Ghaly, Mohamed & Kostakis, Alexandros & Stathopoulos, Konstantinos, 2021. "The (non-) effect of labor unionization on firm risk: Evidence from the options market," Journal of Corporate Finance, Elsevier, vol. 66(C).

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