Do Labor Unions Affect Income Smoothing Through R&D Management?

Ilhang Shin and Sorah Park

Emerging Markets Finance and Trade, 2022, vol. 58, issue 14, 4136-4148

Abstract: Using the firm-level labor union data unique to Korea, this study examines the influence of labor unions on firms’ income smoothing activities through R&D expense adjustment. We show that unionized firms have greater extent of income smoothing through R&D adjustment, suggesting that labor unions impose pressure on management to smooth out fluctuation in earnings path. Also, we find evidence that the positive association between labor union and income smoothing via R&D expense is significant only for non-chaebol firms. These findings add to the existing literature on the impact of labor unions, one of important stakeholders, on firms’ accounting choices and financial reporting behavior.

Date: 2022
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DOI: 10.1080/1540496X.2022.2088346

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