The Agency Cost Effects of Unionization on Firm Value

26 Pages Posted: 15 Apr 2008 Last revised: 17 Feb 2010

See all articles by Vic Naiker

Vic Naiker

University of Melbourne - Faculty of Business and Economics

Farshid Navissi

Monash University

V. G. Sridharan

University of Melbourne - Department of Accounting and Business Information Systems

Date Written: December 1, 2008

Abstract

Using a sample of 99 New Zealand stock exchange-listed firms we employ agency framework and strategy typology to examine whether introduction of unionization legislation affects value of prospector firms more negatively than defender firms. The results from this examination indicate that firms characterized by strategy of higher Growth-Diversity and Innovation-Risk (prospector firms) experience greater loss in value. We attribute the results to the higher agency costs associated with the strategies adopted by prospector firms. The results hold after controlling for variables such as size, industry membership, labor intensity and proportion of unionized workers.

Keywords: Abnormal returns, Unionization, Agency costs, Firm strategy

JEL Classification: J33, D82, J51, K31, G14, G18

Suggested Citation

Naiker, Vic and Navissi, Farshid and Sridharan, Viravalli Govindarajan, The Agency Cost Effects of Unionization on Firm Value (December 1, 2008). Journal of Management Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1120070

Vic Naiker

University of Melbourne - Faculty of Business and Economics ( email )

198 Berkeley Street
Melbourne, Victoria, 3010
Australia

Farshid Navissi (Contact Author)

Monash University ( email )

Building H, Caulfield Campus
Melbourne, Victoria 3142 Vic 3145
Australia
+61 405 664941 (Phone)

Viravalli Govindarajan Sridharan

University of Melbourne - Department of Accounting and Business Information Systems ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

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