Labor Unions and Income Smoothing1. (19th October 2017)

• Record Type: Journal Article
• Authors: Hamm, Sophia J. W.; Jung, Boochun; Lee, Woo‐Jong
• Is Part Of: Contemporary accounting research. Volume 35:Number 3(2018)
• Page Start: 1201
• Page End: 1228
• Publication Date: 2017-10-19
• Subjects: Accounting -- Research -- Periodicals; Accounting -- Canada -- Periodicals; 657
• DOI: 10.1111/1911-3846.12321
• Languages: English
• ISSNs: 0823-9150

Abstract

Abstract: 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.