The effect of industrial strikes on the value of shares listed on the Johannesburg Stock Exchange

Abstract

ABSTRACTThe objective of this study is to determine the effect of strikes on the share values of a sample of companies listed on the Johannesburg Stock Exchange during the period 1984–1993. The results indicate that strikes do have a negative effect on share prices. The costs of a strike do not appear to be transitory since the losses incurred during the strike period are not counterbalanced by positive excess returns after its conclusion. The findings tend to support the notion that capital markets are usually able to anticipate whether an impending contract deadline will result in a strike or settlement. In the prestrike period, however, the stock market consistently underestimates the cost of a strike to shareholders, as demonstrated by the fact that nearly 70% of the total decline of returns (3,64%) occurs after the strike is announced.