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

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...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 2018-06, Vol.53 (3), p.1101-1133
Main Authors: Stanfield, Jared, Tumarkin, Robert
Format: Article
Language:English
Subjects:
Activism
Collective bargaining
Contract labor
Labor contracts
Labor unions
Law
Political participation
Political power
Politics
Rents
Stockholders
Unionization
Values
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Summary: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.
ISSN:0022-1090
1756-6916
DOI:10.1017/S002210901800008X