How Labor Unions Affect Firm Value: Evidence from Political Contributions in the United States

37 Pages Posted: 25 Jan 2018 Last revised: 12 Jun 2019

See all articles by Keegan Woods

Keegan Woods

University of Queensland, Business School, Students

Kelvin Jui Keng Tan

University of Queensland - Business School; Financial Research Network (FIRN)

Date Written: June 11, 2019

Abstract

This paper investigates the relation between political engagement by special interest groups (corporations and labor unions) and corporate stock returns in the United States. Exploiting two opposing interventions affecting the legality of soft-money political contributions from unions and corporations, we find that abnormal returns around the ban (repeal) of soft-money contributions are positively (negatively) related to unionization. These results suggest that political spending by labor unions has a meaningfully deleterious effect on the value of unionized corporations. To counter-engage labor unions in the political arena, we find that unionized firms provide more support (i.e., hard-money contribution) for Republicans.

Keywords: Labor Unions, Political Contributions, Firm Value, Stock Returns

JEL Classification: J51, G32, K16, D72

Suggested Citation

Woods, Keegan and Tan, Kelvin Jui Keng, How Labor Unions Affect Firm Value: Evidence from Political Contributions in the United States (June 11, 2019). Available at SSRN: https://ssrn.com/abstract=3109159 or http://dx.doi.org/10.2139/ssrn.3109159

Keegan Woods

University of Queensland, Business School, Students ( email )

St Lucia
Australia

Kelvin Jui Keng Tan (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Financial Research Network (FIRN) ( email )

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

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