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Woojong Lee - One of the best experts on this subject based on the ideXlab platform.
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Labor Unions and income smoothing
Contemporary Accounting Research, 2018Co-Authors: Sophia J W Hamm, Boochun Jung, Woojong LeeAbstract:We study Labor Unions, an important stakeholder group that has not been a focus of the earnings smoothing literature. We posit that managers strike a balance between sheltering resources from employees’ profit sharing demands and catering to employees’ aversion to downside risk by smoothing earnings. We then hypothesize that a strong Labor union would intensify managerial incentives to smooth earnings. Consistent with our hypothesis, we find that union strength is positively associated with earnings smoothing activities through management of both accruals and R&D expenditures. This article is protected by copyright. All rights reserved.
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Labor Unions and income smoothing
Social Science Research Network, 2017Co-Authors: Sophia J W Hamm, Boochun Jung, Woojong LeeAbstract:Accounting literature suggests that managers have incentives to manage earnings in a way that will enhance their relationship with stakeholders. While the literature has overwhelmingly focused on equity market participants, we study another important stakeholder group: Labor Unions. We predict that Labor Unions strengthen managerial incentives for income smoothing. Managers attempt to manage earnings downwards to shelter firm resources from rent-seeking Labor Unions. Managers also have incentives to manage earnings upwards in bad times to avoid Unions’ greater demand for compensation for expected bankruptcy risk perceived from worse operating performance. We find that income smoothing activities are positively associated with Labor union strength, where such activities are measured by both discretionary income smoothing and R&D investment adjustments. The results are robust to endogeneity concerns and the use of various alternative measures of union strength.
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do Labor Unions always lead to underinvestment
Journal of Management Accounting Research, 2017Co-Authors: Hyungjin Cho, Woojong Lee, Bryan Byunghee Lee, Byungcherl Charlie SohnAbstract:ABSTRACT We examine the relation between Labor union strength and investment efficiency using the comprehensive firm-level data of Korean-listed companies. We find that the perceived underinvestment related to unionization documented in previous studies is attributable to a negative relation between union strength and investment in overinvesting firms. In fact, union strength is positively related to the level of investment in underinvesting firms. We further find that the relation between union strength and investment efficiency is more pronounced for chaebol firms where inefficient investments are more likely due to greater agency problems between the controlling and minority shareholders. Finally, we document that the investment has more positive value implications in firms with a stronger union. Our results suggest that Unions play an important role as a nonfinancial stakeholder in curbing inefficient investments. JEL Classifications: G30; G31; J53; J54; M41; M54.
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do Labor Unions always lead to underinvestment
Social Science Research Network, 2016Co-Authors: Hyungjin Cho, Woojong Lee, Bryan Byunghee Lee, Byungcherl Charlie SohnAbstract:We examine the relation between Labor union strength and investment efficiency using comprehensive firm-level data of Korean listed companies. We find that the perceived underinvestment related to unionization documented in previous studies is attributable to a negative relation between union strength and investment in overinvesting firms. In fact, union strength is positively related to the level of investment in underinvesting firms. We further find that the relation between union strength and investment efficiency is more pronounced for chaebol firms where inefficient investments are more likely due to greater agency problems between the controlling and minority shareholders. Finally, we document that the investment has more positive value implications in firms with a stronger union. Our results suggest that Unions play an important role as a non-financial stakeholder in curbing inefficient investments.
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do managers withhold good news from Labor Unions
Management Science, 2015Co-Authors: Richard Chung, Woojong Lee, Bryan Byunghee Lee, Byungcherl Charlie SohnAbstract:With scarce empirical support, prior literature argues that managers tend to withhold good news and promote bad news to preserve their bargaining power against Labor Unions. This paper provides empirical evidence of this rarely supported argument. Using comprehensive firm-level data from South Korea, where Labor Unions have a long tradition of making credible threats, we find that overall disclosure frequency is negatively related to Labor union strength, and that this relation is more pronounced in firms with good news. We also find that firms with strong Labor Unions withhold good news during the Labor negotiation period and release it in a gradual fashion afterward and that this pattern is more prominent than that of firms with weak or no Unions, implying that managers time news disclosures according to bargaining schedules to achieve better outcomes in Labor negotiations. These results are robust to various sensitivity tests. Data, as supplemental material, are available at http://dx.doi.org/10.1287/m...
Byungcherl Charlie Sohn - One of the best experts on this subject based on the ideXlab platform.
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do Labor Unions always lead to underinvestment
Journal of Management Accounting Research, 2017Co-Authors: Hyungjin Cho, Woojong Lee, Bryan Byunghee Lee, Byungcherl Charlie SohnAbstract:ABSTRACT We examine the relation between Labor union strength and investment efficiency using the comprehensive firm-level data of Korean-listed companies. We find that the perceived underinvestment related to unionization documented in previous studies is attributable to a negative relation between union strength and investment in overinvesting firms. In fact, union strength is positively related to the level of investment in underinvesting firms. We further find that the relation between union strength and investment efficiency is more pronounced for chaebol firms where inefficient investments are more likely due to greater agency problems between the controlling and minority shareholders. Finally, we document that the investment has more positive value implications in firms with a stronger union. Our results suggest that Unions play an important role as a nonfinancial stakeholder in curbing inefficient investments. JEL Classifications: G30; G31; J53; J54; M41; M54.
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do Labor Unions always lead to underinvestment
Social Science Research Network, 2016Co-Authors: Hyungjin Cho, Woojong Lee, Bryan Byunghee Lee, Byungcherl Charlie SohnAbstract:We examine the relation between Labor union strength and investment efficiency using comprehensive firm-level data of Korean listed companies. We find that the perceived underinvestment related to unionization documented in previous studies is attributable to a negative relation between union strength and investment in overinvesting firms. In fact, union strength is positively related to the level of investment in underinvesting firms. We further find that the relation between union strength and investment efficiency is more pronounced for chaebol firms where inefficient investments are more likely due to greater agency problems between the controlling and minority shareholders. Finally, we document that the investment has more positive value implications in firms with a stronger union. Our results suggest that Unions play an important role as a non-financial stakeholder in curbing inefficient investments.
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do managers withhold good news from Labor Unions
Management Science, 2015Co-Authors: Richard Chung, Woojong Lee, Bryan Byunghee Lee, Byungcherl Charlie SohnAbstract:With scarce empirical support, prior literature argues that managers tend to withhold good news and promote bad news to preserve their bargaining power against Labor Unions. This paper provides empirical evidence of this rarely supported argument. Using comprehensive firm-level data from South Korea, where Labor Unions have a long tradition of making credible threats, we find that overall disclosure frequency is negatively related to Labor union strength, and that this relation is more pronounced in firms with good news. We also find that firms with strong Labor Unions withhold good news during the Labor negotiation period and release it in a gradual fashion afterward and that this pattern is more prominent than that of firms with weak or no Unions, implying that managers time news disclosures according to bargaining schedules to achieve better outcomes in Labor negotiations. These results are robust to various sensitivity tests. Data, as supplemental material, are available at http://dx.doi.org/10.1287/m...
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do managers withhold good news from Labor Unions
Social Science Research Network, 2014Co-Authors: Richard Chung, Woojong Lee, Bryan Byunghee Lee, Byungcherl Charlie SohnAbstract:With scarce empirical support, prior literature argues that managers tend to withhold good news and promote bad news to preserve their bargaining power against Labor Unions. This paper provides empirical evidence on this rarely supported argument. Using comprehensive firm-level data from Korea where Labor Unions have a long tradition of making credible threats, we find that overall disclosure frequency is negatively related to Labor union strength, and that this relation is more pronounced in firms with good news. We also find that firms with strong Labor Unions withhold good news during the Labor negotiation period and release it in a gradual fashion afterwards and that this pattern is more prominent than that of the firms with weak or no Unions, implying that managers time news disclosures according to bargaining schedules to achieve better outcomes in Labor negotiations. These results are robust to various sensitivity tests.
Venkat Subramaniam - One of the best experts on this subject based on the ideXlab platform.
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Labor Unions and product quality failures
Management Science, 2021Co-Authors: Omesh Kini, Mo Shen, Jaideep Shenoy, Venkat SubramaniamAbstract:In this paper, we study the impact of Labor Unions on product quality failures. We use a product recall as our measure of quality failure because it is an objective metric that is applicable to a b...
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Labor Unions and product quality failures
Social Science Research Network, 2021Co-Authors: Omesh Kini, Mo Shen, Jaideep Shenoy, Venkat SubramaniamAbstract:In this paper, we study the impact of Labor Unions on product quality failures. We use a product recall as our measure of quality failure because it is an objective metric that is applicable to a broad cross-section of industries. Our analysis employs a union panel setting and close union elections in a regression discontinuity design framework to overcome identification issues. In the panel regressions, we find that firms that are unionized and those that have higher unionization rates experience a greater frequency of quality failures. The results obtain even at a more granular establishment level in a subsample where we can identify the manufacturing establishment associated with the recalled product. When comparing firms in close elections, we find that firms with close union wins are followed by significantly worse product quality outcomes than those with close union losses. These results are amplified in non-right-to-work states, where Unions have a relatively greater influence on the workforce. We find that unionization increases firms’ costs and operating leverage and, consequently, crowds out investments that potentially impact quality. We also find some suggestive evidence that Unions may compromise quality by hurting employee morale and by resisting technological upgrades in the firm. Overall, our results suggest that Unions have an adverse impact on product recalls and, thus, product quality is an important dimension along which Unions impact businesses.
Hernan Ortizmolina - One of the best experts on this subject based on the ideXlab platform.
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Labor Unions operating flexibility and the cost of equity
Journal of Financial and Quantitative Analysis, 2011Co-Authors: Huafeng Chen, Marcin Kacperczyk, Hernan OrtizmolinaAbstract:We study whether the constraints on firms’ operations imposed by Labor Unions affect firms’ costs of equity. The cost of equity is significantly higher for firms in more unionized industries. This effect holds after controlling for several industry and firm characteristics, is robust to endogeneity concerns, and is not driven by omitted variables. Moreover, the unionization premium is stronger when Unions face a more favorable bargaining environment and is highly countercyclical. Unionization is also positively related to various measures of operating leverage. Our findings suggest that Labor Unions increase firms’ costs of equity by decreasing firms’ operating flexibility.
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the strategic use of corporate cash holdings in collective bargaining with Labor Unions
Journal of Financial Economics, 2009Co-Authors: Sandy Klasa, William F Maxwell, Hernan OrtizmolinaAbstract:Abstract We provide evidence that firms in more unionized industries strategically hold less cash to gain bargaining advantages over Labor Unions and shelter corporate income from their demands. Specifically, we show that corporate cash holdings are negatively related with unionization. We also find that this relation is stronger for firms that are likely to place a higher value on gaining a bargaining advantage over Unions and weaker for those firms in which lower cash holdings provide less credible evidence that a firm is unable to concede to union demands. Additionally, we show that for unionized firms increases in cash holdings raise the probability of a strike. Finally, we show that unionization decreases the market value of a dollar of cash holdings. Overall, our findings indicate that firms trade-off the benefits of corporate cash holdings with the costs resulting from a weaker bargaining position with Labor.
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Labor Unions operating flexibility and the cost of equity
2009Co-Authors: Huafeng Chen, Marcin Kacperczyk, Hernan OrtizmolinaAbstract:We examine the impact of operating flexibility on firms' costs of equity by focusing on the constraints that Labor Unions impose on firms' operations. We find that the cost of equity is higher for firms in more unionized industries. The effect holds after we control for a host of industry- and firm-level characteristics, and is stronger when Unions face a more favorable bargaining environment. The results are not driven by an industry life-cycle effect, unobservable time-invariant characteristics, and the magnitudes we estimated are robust to potential endogeneity concerns. The spread in the cost of equity between high- and low-unionization portfolios is highly countercyclical. Unionization is also positively related to various measures of operating leverage, and it is associated with both its Labor and non-Labor components. Our findings are consistent with the view that Labor Unions increase firms' costs of equity by decreasing their operating flexibility.
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the strategic use of corporate cash holdings in collective bargaining with Labor Unions
Social Science Research Network, 2008Co-Authors: Sandy Klasa, William F Maxwell, Hernan OrtizmolinaAbstract:We provide evidence that firms in more unionized industries strategically hold less cash to gain bargaining advantages over Labor Unions and shelter corporate income from their demands. Specifically, we show that corporate cash holdings are negatively related with industry unionization rates. We also find that this relation is stronger for firms that are likely to place a higher value on gaining a bargaining advantage over Unions and weaker for those firms in which lower cash holdings provides less credible evidence that a firm is unable to concede to union demands. Additionally, we document that unionized firms manage their cash holdings downward prior to Labor negotiations and that increases in cash holdings raise the probability of a strike. Finally, we show that unionization decreases the market value of a dollar of cash holdings. Overall, our findings indicate that firms trade-off the benefits of corporate cash holdings with the costs resulting from a weaker bargaining position with Labor.
Omesh Kini - One of the best experts on this subject based on the ideXlab platform.
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Labor Unions and product quality failures
Management Science, 2021Co-Authors: Omesh Kini, Mo Shen, Jaideep Shenoy, Venkat SubramaniamAbstract:In this paper, we study the impact of Labor Unions on product quality failures. We use a product recall as our measure of quality failure because it is an objective metric that is applicable to a b...
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Labor Unions and product quality failures
Social Science Research Network, 2021Co-Authors: Omesh Kini, Mo Shen, Jaideep Shenoy, Venkat SubramaniamAbstract:In this paper, we study the impact of Labor Unions on product quality failures. We use a product recall as our measure of quality failure because it is an objective metric that is applicable to a broad cross-section of industries. Our analysis employs a union panel setting and close union elections in a regression discontinuity design framework to overcome identification issues. In the panel regressions, we find that firms that are unionized and those that have higher unionization rates experience a greater frequency of quality failures. The results obtain even at a more granular establishment level in a subsample where we can identify the manufacturing establishment associated with the recalled product. When comparing firms in close elections, we find that firms with close union wins are followed by significantly worse product quality outcomes than those with close union losses. These results are amplified in non-right-to-work states, where Unions have a relatively greater influence on the workforce. We find that unionization increases firms’ costs and operating leverage and, consequently, crowds out investments that potentially impact quality. We also find some suggestive evidence that Unions may compromise quality by hurting employee morale and by resisting technological upgrades in the firm. Overall, our results suggest that Unions have an adverse impact on product recalls and, thus, product quality is an important dimension along which Unions impact businesses.
