 Labor unions and real earnings managementKiyoung Chang, Young Sang Kim, Ying Li and Jong Chool Park Journal of Corporate Finance, 2022, vol. 75, issue C Abstract: Using firm-level union membership data for the period of 2002–2016, we show that firms with higher union membership are more likely to engage in real earnings management than accrual-based earnings management, with abnormal production as the dominant form of real earnings management. We further show the causal effect of union membership on real earnings management by exploiting two natural experiments-the staggered enactment of state-level right-to-work (RTW) laws and the shock to unemployment insurance benefits (UIB)-as exogenous shocks to union power. Further exploration shows that the positive association between union membership and real earnings management is more pronounced for unionized firms with (1) high managerial incentives to reduce employee hiring and retention costs and (2) operating inflexibility created by labor overinvestment. Our evidence is consistent with managerial incentives for upward earnings management to mitigate employees' perceived job security and the cost of employee management in competitive labor markets. Keywords: Labor unions; Real earnings management; Abnormal production (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:75:y:2022:i:c:s0929119922000852 DOI: 10.1016/j.jcorpfin.2022.102242 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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