SHAREHOLDER RISK AND RETURNS IN UNION AND NONUNION FIRMS

This study examines shareholder risk and rates of return in union and nonunion companies in 1973-87. Shareholder risk declined with the exte nt of union coverage in the 1970s, and returns were lower among highly unionized companies than among other companies during the late 1970s and early 1980s. Union-nonunion differences in risk were small and ins ignificant by the mid-1980s, however, and there was no systematic rela tionship between union coverage and shareholder returns in the mid-197 0s or mid-1980s. Finally, firms with relatively low rates of return to investors in 1977-82 tended to experience larger than average decline s in firm-level union coverage between 1977 and 1987. As a partial exp lanation for these findings, the authors posit a relationship between shareholder risk and the differential use of COLAs across industries a nd time.