Abstract
This study evaluates the effect of labor strikes on shareholder wealth, using data of Canadian companies listed on the Toronto Stock Exchange. The sample comprises 100 strikes that occurred between 1983 and 1989. The results indicate that for the total sample, shareholders' wealth decreases by 2.1% during the 50 days prior to the strike day. Further evidence indicates that although shareholders of shorter duration strikes lose about 6.2% during the 50 days preceding the strike day, the shareholders of companies involved in longer strikes gain 2.8% in the same 50-day period. Similar results of differential impact have been observed in the U.S. The test results of the cross-sectional corporate factors, which were hypothesized to affect the loss in equity values during the 50-day anticipatory period through to the end of the strike, indicate that the decline in share prices is greater for smaller companies, but no statistical relationship was observed between abnormal stock returns and either profitability or inventory levels.
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