Organized Labor and Inventory Stockpiling

The Accounting Review, Forthcoming (doi.org/10.2308/TAR-2018-0117)

49 Pages Posted: 25 Jan 2018 Last revised: 25 Mar 2021

See all articles by Sophia Hamm

Sophia Hamm

Tulane University - A.B. Freeman School of Business

Boochun Jung

University of Hawaii at Manoa - School of Accountancy

Woo-Jong Lee

Seoul National University

Daniel G. Yang

Ohio State University (OSU) - Fisher College of Business

Date Written: February 18, 2021

Abstract

We document that managers stockpile excess inventory to mitigate the operational risk posed by labor unions and to maintain bargaining power in labor negotiations. Inventory levels are higher for union firms and are incrementally higher preceding the renegotiation of collective bargaining agreements with unions. Inventory stockpiling at union firms is more salient when capital market pressure for transparency or information spillover from peers constrains managers from using disclosure strategies. We further show that managers weigh the costs and benefits of inventory stockpiling, as holding excess inventory due to the presence of a union is negatively associated with future profitability but provides the benefits of avoiding a stockout and mitigating negative outcomes from a strike. Our findings highlight the importance of a major stakeholder, i.e., labor, in managers’ investment decision-making.

Keywords: labor union, inventory, investment efficiency, strike

JEL Classification: G31, J52, J53

Suggested Citation

Hamm, Sophia and Jung, Boochun and Lee, Woo-Jong and Yang, Daniel G., Organized Labor and Inventory Stockpiling (February 18, 2021). The Accounting Review, Forthcoming (doi.org/10.2308/TAR-2018-0117), Available at SSRN: https://ssrn.com/abstract=3104700 or http://dx.doi.org/10.2139/ssrn.3104700

Sophia Hamm (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Boochun Jung

University of Hawaii at Manoa - School of Accountancy ( email )

College of Business Administration
Honolulu, HI 96822
United States

Woo-Jong Lee

Seoul National University ( email )

Gwanak-ro 1, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)

Daniel G. Yang

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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