Institutional Investors and Mispricing of Unionized Firms
45 Pages Posted: 4 Mar 2021 Last revised: 21 Mar 2023
Date Written: May 27, 2021
Abstract
We examine investment by different types of institutional investors in firms with strong labor unions. We find that hedge funds own a lower percentage of shares in these firms than in other firms. On the other hand, passive institutional investors and institutional investors as a group own a higher percentage. Our tests suggest that the relation between unionization and hedge fund ownership is causal: when union power changes in a firm, hedge fund ownership changes in the opposite direction. Instead, passive investor holdings in unionized firms seem to be driven by other firm characteristics.
Keywords: Institutional investors, Hedge funds, Passive investors, Labor unions, Labor laws, Stock performance
JEL Classification: G14, G23, G38
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