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Labor unionization and real earnings management: Evidence from labor elections

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

Abstract

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.

Suggested Citation

  • Vivek Astvansh & Beibei Wang & Tao Chen & Jimmy Chengyuan Qu, 2024. "Labor unionization and real earnings management: Evidence from labor elections," PLOS ONE, Public Library of Science, vol. 19(2), pages 1-27, February.
    • Handle: RePEc:plo:pone00:0292889
    DOI: 10.1371/journal.pone.0292889
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