This study provides new evidence on the industrywide impact of strikes by investigating how strikes have affected the values of struck and nonstruck airlines. Using stock market data for the years 1963–86, the authors show that most strikes adversely affected the value of struck airlines' stock but enhanced the stock value of nonstruck carriers. The results also show that strikes before October 1978, which marked the end of strict regulation of the industry and of the employers' mutual aid pact, had some effects different from those of strikes after that date.
Get full access to this article
View all access options for this article.
References
1.
AharonyJoseph, and SwaryItzhak. 1983. “Contagion Effects of Bank Failures: Evidence from Capital Markets.”Journal of Business, Vol. 56, No. 3 (July), pp. 305–22.
2.
BaileyElizabeth E.GrahamDavid R., and KaplanDaniel P.. 1985. Deregulating the Airlines. Cambridge: MIT Press.
3.
BeckerBrian E.1987. “Concession Bargaining: The Impact on Shareholders' Equity.”Industrial and Labor Relations Review, Vol. 40, No. 2 (January), pp. 268–79.
4.
BeckerBrian E., and OlsonCraig A.. 1987. “Labor Relations and Firm Performance.” In KleinerMorris M.BlockRichard N.RoomkinMyron, and SalsburgSidney W., eds., Human Resources and the Performance of the Firm. Madison, Wis.: Industrial Relations Research Association, pp. 43–85.
5.
BeckerBrian E., and OlsonCraig A.. 1986. “The Impact of Strikes on Shareholder Equity.”Industrial and Labor Relations Review, Vol. 39, No. 3 (April), pp. 425–38.
6.
BorensteinSeverin, and ZimmermanMartin B.. 1988. “Market Incentives for Safe Commercial Airline Operation.”American Economic Review, Vol. 78, No. 5 (December), pp. 913–35.
7.
BrownStephen J., and WarnerJerold B.. 1985. “Using Daily Stock Returns: The Case of Event Studies.”Journal of Financial Economics, Vol. 14, No. 1 (March), pp. 3–31.
8.
CappelliPeter. 1987. “Airlines.” In LipskyDavid B. and DonnClifford B., eds., Collective Bargaining in American Industry: Contemporary Perspectives and Future Directions. Lexington, Mass.: Lexington Books, pp. 135–86.
9.
CarterColinHuethDarrell L.MamerJohn, and SchmitzAndrew. 1987. “Agricultural Labor Strikes and Farmers' Income.”Economic Inquiry, Vol. 25, No. 1 (January), pp. 121–33.
10.
ChalkAndrew. 1986. “Market Forces and Aircraft Safety: The Case of the DC-10.”Economic Inquiry, Vol. 24, No. 1 (January), pp. 43–60.
11.
ChalkAndrew. 1989. “Comment on Karels.”Economic Inquiry, Vol. 27, No. 2 (April), pp. 355–56.
12.
CurtinWilliam J.1986. “Airline Deregulation and Labor Relations.”Monthly Labor Review, Vol. 109, No. 6 (June), pp. 29–30.
13.
DavidsonWallace N.IIIWorrellDan L., and GarrisonSharon H.. 1988. “Effect of Strike Activity on Firm Value.”Academy of Management Journal, Vol. 31, No. 2 (June), pp. 387–94.
14.
DoddPeter, and WarnerJerold B.. 1983. “On Corporate Governance: A Study of Proxy Contracts.”Journal of Financial Economics, Vol. 11, No. 1–4 (April), pp. 401–38.
15.
FuessScott M.Jr.1990. “Strike Strategies and the Minimum Effective Union.”Journal of Labor Research, Vol. 11, No. 1 (Winter), pp. 59–72.
16.
GreerCharles R.MartinStanley A., and ReusserTed A.. 1980. “The Effect of Strikes on Shareholder Returns.”Journal of Labor Research, Vol. 1, No. 4 (Fall), pp. 217–29.
17.
HendricksWallaceFeuillePeter, and SzerszenCarol. 1980. “Regulation, Deregulation, and Collective Bargaining in Airlines.”Industrial and Labor Relations Review, Vol. 34, No. 1 (October), pp. 67–81.
18.
HirschJohn S.1969. “Strike Insurance and Collective Bargaining.”Industrial and Labor Relations Review, Vol. 2, No. 3 (April), pp. 399–415.
19.
HofferGeorge E.PruittStephen W., and ReillyRobert J.. 1988. “The Impact of Product Recalls on the Wealth of Sellers: A Reexamination.”Journal of Political Economy, Vol. 96, No. 3 (June), pp. 663–70.
20.
JarrellGregg, and PeltzmanSam. 1985. “The Impact of Product Recalls on the Wealth of Sellers.”Journal of Political Economy, Vol. 93, No. 3 (June), pp. 512–36.
21.
KahnMark L.1980. “Airlines.” In SomersGerald G., ed., Collective Bargaining: Contemporary American Experience. Madison, Wis.: Industrial Relations Research Association, pp. 315–72.
22.
KarelsGordon V.1989. “Market Forces and Aircraft Safety: An Extension.”Economic Inquiry, Vol. 27, No. 2 (April), pp. 345–54.
23.
KarperMark D.1987. “Tires.” In Lipsky and Donn, pp. 79–101.
24.
LinnemanPeter, and SpillerPablo T.. 1983. “On Estimating Unions' Motives.” Unpublished paper, University of Pennsylvania.
25.
McKelveyJean T., ed. 1988. Cleared for Takeoff: Airline Labor Relations Since Deregulation. Ithaca, N.Y.: ILR Press.
26.
MaloneyMichael T.McCormickRobert E., and TollisonRobert D.. 1979. “Achieving Cartel Profits Through Unionization.”Southern Economic Journal, Vol. 46, No. 2 (October), pp. 628–34.
27.
MichelAllen, and ShakedIsrael. 1984. “Airline Performance Under Deregulation: The Shareholders' Perspective.”Financial Management, Vol. 13, No. 2 (Summer), pp. 5–14.
28.
MooreThomas Gale. 1986. “U.S. Airline Deregulation: Its Effects on Passengers, Capital, and Labor.”Journal of Law and Economics, Vol. 29, No. 1 (April), pp. 1–28.
29.
NeumannGeorge R.1980. “The Predictability of Strikes: Evidence from the Stock Market.”Industrial and Labor Relations Review, Vol. 33, No. 4 (July), pp. 525–35.
30.
NeumannGeorge R., and RederMelvin W.. 1984. “Output and Strike Activity in U.S. Manufacturing: How Large Are the Losses?”Industrial and Labor Relations Review, Vol. 37, No. 2 (January), pp. 197–211.
31.
NomaniAsra Q.1989. “But Pan Am Turns Situation to Its Benefit.”Wall Street Journal, March 17, p. B1.
32.
NorthrupHerbert R.1971. “The Railway Labor Act: A Critical Reappraisal.”Industrial and Labor Relations Review, Vol. 25, No. 1 (October), pp. 3–31.
33.
NorthrupHerbert R.1977. “Airline Strike Insurance: A Study in Escalation. Comment.”Industrial and Labor Relations Review, Vol. 30, No. 3 (April), pp. 364–72.
34.
NorthrupHerbert R.1983. “The New Employee-Relations Climate in Airlines.”Industrial and Labor Relations Review, Vol. 36, No. 2 (January), pp. 167–81.
35.
ReesAlbert. 1989. The Economics of Trade Unions, 3rd ed.Chicago: University of Chicago Press.
36.
RehmusCharles M., ed. 1977. The Railway Labor Act at Fifty: Collective Bargaining in the Railroad and Airline Industries. Washington, D.C.: National Mediation Board.
37.
ThompsonEarl A.1980. “On Labor's Right to Strike.”Economic Inquiry, Vol. 18, No. 4 (October), pp. 640–53.
38.
ThornicroftKenneth W.1989. “Airline Deregulation and the Airline Labor Market.”Journal of Labor Research, Vol. 10, No. 2 (Spring), pp. 163–81.
39.
TracyJoseph. 1988. “Testing Strategic Bargaining Models Using Stock Market Data.” Working Paper No. 2754, National Bureau of Economic Research.
40.
UnterbergerS. Herbert, and KoziaraEdward C.. 1975. “Airline Strike Insurance: A Study in Escalation.”Industrial and Labor Relations Review, Vol. 29, No. 1 (October), pp. 26–45.
41.
UnterbergerS. Herbert, and KoziaraEdward C.. 1977. “Reply.”Industrial and Labor Relations Review, Vol. 30, No. 3 (April), pp. 373–79.
42.
UnterbergerS. Herbert, and KoziaraEdward C.. 1980. “The Demise of Airline Strike Insurance.”Industrial and Labor Relations Review, Vol. 34, No. 1 (October), pp. 82–89.
43.
U.S. News and World Report.1989. “Caught in Eastern's Slipstream.” March 27, pp. 10, 12.
44.
ValenteJudith. 1989. “Strike at Eastern Proves Boon for Rivals as They Get. More Traffic.”Wall Street Journal, March 8, p. A3.
45.
Wall Street Journal Index. 1983, 1984, 1985. New York: Dow Jones & Co.
