The Effect of Two-Tier Collective Bargaining Agreements on Shareholders Equity


Uses an event-time methodology to examine the impact of two-tier wage provisions in collective bargaining agreements on shareholder equity from 1981 through 1986. Following announcements of two-tier agreements, in which newly hired workers are paid less for the same work than senior workers, about half of the firms in the sample had negative abnormal returns (returns with values below the expected market returns) and half had positive abnormal returns. Because the positive returns exceeded the negative returns in absolute value, however, there was a statistically significant increase in mean firm value. The abnormal returns averaged between +2% and +4% over a 10- to 12-week period following the announcement, a figure that approximately equals the transactions cost of a stock purchase. The authors speculate that this rather low average gain may help explain the marked decline of new two-tier agreements during the latter half of the 1980's. [ABSTRACT FROM AUTHOR] Copyright of ILR Review is the property of Sage Publications Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)



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ILR Review