Labor unionization and real earnings management: Evidence from labor elections

Vivek Astvansh; Beibei Wang; Tao Chen; Jimmy Chengyuan Qu

doi:10.1371/journal.pone.0292889

Labor Unionization and Real Earnings Management: Evidence from Labor Elections

Vivek Astvansh, Beibei Wang, Tao Chen and Jimmy Chengyuan Qu

2024 · Published in PLOS ONE 19(2): e0292889 · DOI 10.1371/journal.pone.0292889

PDF of Labor Unionization and Real Earnings Management: Evidence from Labor Elections (Published version, open access)

In one sentence

Firms whose workers narrowly vote to unionize reduce real earnings management compared with firms where the vote narrowly fails.

Summary

The paper studies how labour unionization affects real earnings management, exploiting close-call union elections. In a local regression discontinuity analysis, firms where the union narrowly passes the 50% threshold significantly reduce real earnings management relative to firms where it narrowly fails, consistent with greater labour power putting pressure on managers. The effect is stronger for firms headquartered in right-to-work states and when managers face less pressure to manage earnings. A global parametric regression discontinuity analysis and tests using industry-level unionization support the external validity of the results.

Abstract as published

By exploiting the local randomness in close-call labor elections, the authors find a negative impact of labor unionization at a firm on its real earnings management (REM). The finding suggests a managerial pressure effect of increased labor power. In a local regression discontinuity (RD) analysis, firms that narrowly pass the 50% threshold show a significant decrease in REM, relative to their peers that narrowly fail. This effect is stronger for firms headquartered in right-to-work states and when managers have less pressure to manage earnings. Evidence from a global parametric RD analysis and a multivariate OLS test using industry-level unionization measures confirms the external validity of results in local RD analysis. Overall, the research sheds new light on the economic consequence of labor unionization on employers' accounting decisions.

Citation

Vivek Astvansh, Beibei Wang, Tao Chen, Jimmy Chengyuan Qu (2024). Labor unionization and real earnings management: Evidence from labor elections. PLOS ONE, 19(2), e0292889. https://doi.org/10.1371/journal.pone.0292889

BibTeX

@article{astvansh2024labor,
  title = {{Labor unionization and real earnings management: Evidence from labor elections}},
  author = {Vivek Astvansh and Beibei Wang and Tao Chen and Jimmy Chengyuan Qu},
  journal = {PLOS ONE},
  year = {2024},
  volume = {19},
  number = {2},
  pages = {e0292889},
  doi = {10.1371/journal.pone.0292889}
}