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The Impact of Strikes on Shareholder Equity

Author

Listed:
  • 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 percent 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.

Suggested Citation

  • Brian E. Becker & Craig A. Olson, 1986. "The Impact of Strikes on Shareholder Equity," ILR Review, Cornell University, ILR School, vol. 39(3), pages 425-438, April.
    • Handle: RePEc:sae:ilrrev:v:39:y:1986:i:3:p:425-438
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    Citations

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    Cited by:

    1. Lin, Carl, 2011. "Give Me Your Wired and Your Highly Skilled: Measuring the Impact of Immigration Policy on Employers and Shareholders," IZA Discussion Papers 5754, Institute for the Study of Labor (IZA).
    2. David G. Meyer & William N. Cooke, 1993. "US Labour Relations in Transition: Emerging Strategies and Company Performance," British Journal of Industrial Relations, London School of Economics, vol. 31(4), pages 531-552, December.
    3. François Belot & Timothée Waxin, 2017. "Labor Conflicts in French Workplaces: Does (the Type of) Family Control Matter?," Journal of Business Ethics, Springer, vol. 146(3), pages 591-617, December.
    4. 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.
    5. Afik, Zvika & Haim, Roi & Lahav, Yaron, 2019. "Advance notice labor conflicts and firm value—An event study analysis on Israeli companies," Finance Research Letters, Elsevier, vol. 31(C).
    6. Ben-Nasr, Hamdi & Ghouma, Hatem, 2018. "Employee welfare and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 700-725.
    7. Lin, Carl, 2011. "Give Me Your Wired and Your Highly Skilled: Measuring the Impact of Immigration Policy on Employers and Shareholders," IZA Discussion Papers 5754, IZA Network @ LISER.
    8. Shafiq Alvi, 2001. "The impact of strikes on Canadian trade balance," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 389-396.
    9. Tomasz Piotr Wisniewski & Brendan John Lambe & Alexandra Dias, 2020. "The Influence of General Strikes against Government on Stock Market Behavior," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(1), pages 72-99, February.
    10. 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.
    11. Lin, Carl, 2012. "Less Myth, More Measurement: Decomposing Excess Returns from the 1989 Minimum Wage Hike," IZA Discussion Papers 6269, IZA Network @ LISER.
    12. John M. Abowd & George T. Milkovich & John M. Hannon, 1990. "The Effects of Human Resource Management Decisions on Shareholder Value," ILR Review, Cornell University, ILR School, vol. 43(3), pages 203-2-236-, April.

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