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
Date Written: December 15, 2016
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: Suggested Citation