Market reaction to industrial actions in South Africa.
Date
2012-11-07
Authors
Ngidi, Nondumiso
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Abstract
This study examines the impact of strike action on the stock market in SA, particularly
the company share price. In recent years, SA has seen a steady increase in strike actions
related to wage increases, which have generally been of short duration. The study is
conducted by computing abnormal returns and subsequently cumulative abnormal
returns for listed companies that had experienced strikes between 2003 and 2009.
The sample included 49 listed companies on Johannesburg Stock Exchange. The results
of the study reveal that stock prices react negatively to the news of a strike action five
days prior to the strike and continue on a downward trajectory approximately 5 days
post the strike action. The study finds that JSE is not an efficient market as it takes days
for the market to return to equilibrium after an announcement.
The research observed that there were numerous factors that influence the occurrence
of strikes/industrial actions in South Africa namely; SA’s political history, trade unions
irrational behaviour, information asymmetry and economic climate among other factor.
Description
Keywords
Strikes, South Africa, Industrial action, Stock prices, JSE, Johannesburg Stock Exchange