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Timing is key: When does the market react to unionization efforts?

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  • Hofmann, Bastian
  • Schoonjans, Eline

Abstract

We estimate short-term capital-market effects of unionization efforts at publicly-listed firms and their subsidiaries in the United States between 2011 and 2019. Our short-horizon event study reports significant negative average cumulative abnormal returns at the public announcement of successful union election certifications. Our results suggest that, on average, the market perceives successful unionization as detrimental to future firm performance, expects unionization efforts, and mainly reacts when all uncertainty is resolved at the publicly-announced certification. Finally, we show that shareholders’ expectations regarding unionization efforts differ for firms with recurrent and rare election cases.

Suggested Citation

  • Hofmann, Bastian & Schoonjans, Eline, 2023. "Timing is key: When does the market react to unionization efforts?," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001502
    DOI: 10.1016/j.frl.2023.103777
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    References listed on IDEAS

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    1. David S. Lee & Alexandre Mas, 2012. "Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961--1999," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 333-378.
    2. Ruback, Richard S & Zimmerman, Martin B, 1984. "Unionization and Profitability: Evidence from the Capital Market," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1134-1157, December.
    3. Macpherson, David A. & Hirsch, Barry, 2021. "Five Decades of Union Wages, Nonunion Wages, and Union Wage Gaps at Unionstats.com," IZA Discussion Papers 14398, IZA Network @ LISER.
    4. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    5. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    6. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
    7. Kim, Jeong-Bon & Zhang, Eliza Xia & Zhong, Kai, 2021. "Does unionization affect the manager–shareholder conflict? Evidence from firm-specific stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 69(C).
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    Cited by:

    1. Schoonjans, Eline, 2025. "Better safe than sorry? Toxic waste management after union elections," ZEW policy briefs 03/2025, ZEW - Leibniz Centre for European Economic Research.

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