Evidence of income-decreasing earnings management before labour negotiations within the firm
AbstractThe "political costs" hypothesis predicts that labour bargaining creates incentives to reduce accounting earnings in order to avoid salary demands. Previous studies in countries with a "close shop system", such as the U.S. and Canada, have obtained mixed results. We argue that the political costs hypothesis is better suited to the "open shop system" of Continental European countries. Using a sample of Spanish companies, Jones (1991) model and its extensions are used to analyse total and discretionary accruals around the time of labour negotiations. The evidence that we obtain is consistent with the hypothesis that managers depress earnings prior to negotiations.
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Bibliographic InfoArticle provided by Fundación SEPI in its journal Investigaciones Económicas.
Volume (Year): 32 (2008)
Issue (Month): 2 (May)
Contact details of provider:
Postal: Investigaciones Economicas Fundación SEPI Quintana, 2 (planta 3) 28008 Madrid Spain
Web page: http://www.fundacionsepi.es/
Find related papers by JEL classification:
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
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