Using corporate social responsibility (CSR) scores, we examine the effect of unionization on non-shareholding stakeholders and the value of CSR for unionized firms. Our findings suggest that unionization leads to lower CSR. This negative relation between unionization and CSR is stronger for financially constrained firms. We address endogeneity issues by controlling for firm characteristics including firm fixed effects, examining a quasi-natural experiment, and using regression discontinuity design examining union certification elections. Unionized firms with lower CSR have better alignment of CEO and shareholder interests and higher market values than other unionized firms.

Firms that made earnings-decreasing restatements over the period 1990 to 2001 lost $72 billion around restatement announcements. Forty-seven large-loss firms restating their earnings in the 1998 to 2001 period account for $66 billion of these losses. Despite very good stock performance and low book-to-market values before earnings misstatements, large-loss firms are associated with mean abnormal returns of −39% during the announcement period, and underperform matched firms by 44% during the first post-restatement year. Collectively, our results support Jensen's [Jensen, M.C. Agency costs of overvalued equity. Financial Management 2005;34; 5–19.] argument that substantial overvaluation of equity pressures managers to manipulate earnings and when investors learn about earnings restatements by overvalued firms, they reevaluate firms to correct not only for pre-misstatement overvaluation, but also for the loss of confidence in the firms' managers.