Does the Political Power of Non-Financial Stakeholders Affect Firm Values? Evidence from Labor Unions

Stanfield, Jared & Tumarkin, Robert, 2018. "Does the Political Power of Nonfinancial Stakeholders Affect Firm Values? Evidence from Labor Unions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 53(03), pages 1101-1133, June

65 Pages Posted: 15 Aug 2013 Last revised: 28 Dec 2018

See all articles by Jared R. Stanfield

Jared R. Stanfield

University of Oklahoma; Financial Research Network (FIRN)

Robert Tumarkin

UNSW Australia Business School, School of Banking and Finance; Financial Research Network (FIRN)

Date Written: December 15, 2016

Abstract

While 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.

Keywords: Political Connections, Political Power, Labor Union, Stakeholder, Firm Value, Wages

JEL Classification: G32, G38, J51

Suggested Citation

Stanfield, Jared R. and Tumarkin, Robert, Does the Political Power of Non-Financial Stakeholders Affect Firm Values? Evidence from Labor Unions (December 15, 2016). Stanfield, Jared & Tumarkin, Robert, 2018. "Does the Political Power of Nonfinancial Stakeholders Affect Firm Values? Evidence from Labor Unions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 53(03), pages 1101-1133, June. Available at SSRN: https://ssrn.com/abstract=2310427 or http://dx.doi.org/10.2139/ssrn.2310427

Jared R. Stanfield (Contact Author)

University of Oklahoma ( email )

Norman, OK 73019
United States

HOME PAGE: http://jaredstanfield.com

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Robert Tumarkin

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia
+61 02 9385 6730 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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