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Opportunistic Proposals by Union Shareholders

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  • John G Matsusaka
  • Oguzhan Ozbas
  • Irene Yi

Abstract

This paper investigates whether labor unions use proposals opportunistically to influence contract negotiations. Our empirical strategy relies on the observation that proposals have higher bargaining-chip value in contract expiration years, when a new contract must be negotiated. We find that in contract expiration years compared with nonexpiration years, unions increase their proposal rate by one-fifth, particularly proposals concerning executive compensation. Union proposals made during expiration years are less likely to be supported by other shareholders or a leading proxy advisor; the market reacts negatively to union proposals in expiration years; and withdrawn union proposals are accompanied by higher wage settlements. Received March 14, 2017; editorial decision July 19, 2018 by Editor Wei Jiang. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Suggested Citation

  • John G Matsusaka & Oguzhan Ozbas & Irene Yi, 2019. "Opportunistic Proposals by Union Shareholders," The Review of Financial Studies, Society for Financial Studies, vol. 32(8), pages 3215-3265.
    • Handle: RePEc:oup:rfinst:v:32:y:2019:i:8:p:3215-3265.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhy125
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    Cited by:

    1. Chatt, Robert & Gustafson, Matthew & Welker, Adam, 2021. "Firing frictions and the U.S. mergers and acquisitions market," Journal of Banking & Finance, Elsevier, vol. 128(C).
    2. Blake Rayfield & Omer Unsal, 2021. "Institutional monitoring and litigation risk: Evidence from employee disputes," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(1), pages 81-119, April.
    3. Havranek, Tomas & Bajzík, Josef & Irsova, Zuzana & Novak, Jiri, 2023. "Does Shareholder Activism Create Value? A Meta-Analysis," CEPR Discussion Papers 18233, C.E.P.R. Discussion Papers.
    4. Mike Burkart & Hongda Zhong, 2023. "Equity Issuance Methods and Dilution," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 12(1), pages 78-130.
    5. Burkart, Mike & Zhong, Hongda, 2023. "Equity issuance methods and dilution," LSE Research Online Documents on Economics 117895, London School of Economics and Political Science, LSE Library.
    6. 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).

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