Labor Unions and Income Smoothing

45 Pages Posted: 25 Oct 2018 Last revised: 27 Oct 2018

See all articles by Sophia J.W. Hamm

Sophia J.W. Hamm

Ohio State University (OSU) - Fisher College of Business

Boochun Jung

University of Hawaii - School of Accountancy

Woo-Jong Lee

Seoul National University

Date Written: October 2, 2018

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.

Keywords: Labor Unions; Earnings Smoothing; Accruals Management; R&D Expenditures Management

JEL Classification: M41; M43; J53

Suggested Citation

Hamm, Sophia and Jung, Boochun and Lee, Woo-Jong, Labor Unions and Income Smoothing (October 2, 2018). Contemporary Accounting Research, Vol. 35, No. 3, 2018. Available at SSRN: https://ssrn.com/abstract=3259424

Sophia Hamm (Contact Author)

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

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-2529 (Phone)

Boochun Jung

University of Hawaii - 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, 151-916
Korea, Republic of (South Korea)

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