Institutional Investors and Mispricing of Unionized Firms

70 Pages Posted: 4 Mar 2021 Last revised: 19 Jun 2021

See all articles by Viktoriya Lantushenko

Viktoriya Lantushenko

Saint Joseph's University

Dalia Marciukaityte

Illinois State University

Samuel H. Szewczyk

Drexel University - Department of Finance

Date Written: May 27, 2021

Abstract

We examine investment by different types of institutional investors in underperforming firms with agency problems complicated by laws and regulations: U.S. firms with strong labor unions. As unions have special powers granted by government, unions have to serve the interests of politicians if they want to maintain or increase these powers. Moreover, these powers allow unions to have a significant negative impact on firms. We find that more knowledgeable institutional investors reduce their investment in firms with strong unions. On the other hand, passive investors have high investment in these firms and bear a disproportionately high portion of unionization costs.

Keywords: Institutional investors, Hedge funds, Passive investors, Labor unions, Labor laws, Stock performance

JEL Classification: G14, G23, G38

Suggested Citation

Lantushenko, Viktoriya and Marciukaityte, Dalia and Szewczyk, Samuel H., Institutional Investors and Mispricing of Unionized Firms (May 27, 2021). Available at SSRN: https://ssrn.com/abstract=3763564 or http://dx.doi.org/10.2139/ssrn.3763564

Viktoriya Lantushenko

Saint Joseph's University ( email )

5600 City Avenue,
Philadelphia, PA 19131
United States

Dalia Marciukaityte (Contact Author)

Illinois State University ( email )

Normal, IL 61790
United States

Samuel H. Szewczyk

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-1746 (Phone)

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