Securities price effects of unionization legislation

Abstract

Prior studies document that firms experience negative stock price effects in response to unionization. We study the economic effects of a radical change in unionization legislation in New Zealand and hypothesize that the stock price effect of unionization is a function of prior unionization status of firms. We provide evidence that legislative events that increase the likelihood of introducing more stringent legislation do not affect stock prices of high-unionized firms, whereas low-unionized firms are affected negatively and significantly. Legislative events that signal less stringent unionization legislation result in significant stock price increases for all firms.