The Effects of Automobile Strikes on the Stock Value of Steel Suppliers

Abstract

This analysis of stock market data for the years 1965–90 indicates that upon announcements of automobile strikes, steel suppliers experienced statistically significant negative returns, about equal to the negative returns experienced by the struck automobile producers. Significantly larger negative interindustry effects were associated with large multi-plant strikes than with smaller one-plant strikes, and the negative effects were significantly greater in the later years of the sample period, a time of relatively weak financial condition, than in the earlier years, a time of stronger financial condition. The author concludes that researchers and policy-makers evaluating the private and social costs of strikes should consider adverse effects on the profitability not only of the struck industries, but also of linked industries, and should take into account the important roles of strike size and industry financial health.

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