Labor Union Contract Negotiations and Accounting Choices.
ABSTRACT: This paper examines the hypothesis that managers reduce reported earnings during labor union contract negotiations relative to earnings released before and after contracts are negotiated. Analyzing earnings around labor negotiations provides evidence regarding when managers manipulate accounting earnings and, hence, information regarding the costs and benefits of managing earnings. We find no evidence of lower than expected earnings during negotiations. Time series of quarterly and annual unexpected earnings, using several measures of expected earnings, are examined around labor talks for a sample of 105 unionized companies over the period 1968-1981. Both random and matched samples of firms not engaged in labor negotiations also are chosen. The time series of earnings during labor talks for the unionized sample is indistinguishable from that of the random and matched samples. An analysis of these firms' quarterly earnings time-series properties and their abnormal stock returns suggests that in this sample period unionized firms had less incentive to reduce earnings because they already were performing poorly.
- DOI
- 10.2308/tar-4479076
- Volume
- 61 (4)
- Pages
- 692-712
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref