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The battle between activist hedge funds and labor unions

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  • Niu, Xu

Abstract

Activist hedge funds are more likely to target unionized firms. When they do, the short-term stock performance is higher, especially when the hedge funds’ targeting strategy is hostile. Employees and labor organizations at target firms tend to oppose activist hedge funds. Firms are more likely to unionize after being targeted by hedge funds, and employee satisfaction deteriorates at target firms. Moreover, unionized firms are more likely to strike after being targeted, and those strikes in opposition to hedge fund intervention are more severe and more detrimental to the firms. This paper further explores potential costs and harmful consequences to the firm value due to the tension between activist hedge funds and labor unions. After being targeted, unionized firms tend to have lower profitability, weakened corporate governance, exposure to a higher degree of competitive and product market threats, and a higher crash risk in stock prices.

Suggested Citation

  • Niu, Xu, 2024. "The battle between activist hedge funds and labor unions," Journal of Empirical Finance, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:empfin:v:78:y:2024:i:c:s0927539824000379
    DOI: 10.1016/j.jempfin.2024.101502
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    More about this item

    Keywords

    Hedge fund activism; Labor relations; Unionization;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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