Organized Labor Effects on SG&A Cost Behavior*

• 成果类型: Article
• 署名作者: Chang, Hsihui; Dai, Xin; Lohwasser, Eric; Qiu, Yue
• 署名单位: Drexel University; Colorado State University System; Colorado State University Fort Collins; Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12737
• 发表日期: 2022
• 页码: 404-427
• 关键词: earnings management; Market reaction; unions; wages; incentives; NEGOTIATIONS; PRODUCTIVITY; unionization; flexibility; income

摘要

This study examines how organized labor affects selling, general, and administrative (SG&A) cost behavior. Human capital is emerging as firms' most valuable asset, and we further the understanding of the interaction between employees and SG&A cost behavior. We predict and find that labor cost stickiness is higher for firms facing stronger unions, but the stickiness of SG&A costs is lower. This is consistent with our arguments that in firms with stronger unions, managers' discretionary decision to retain SG&A resources is negatively affected by higher labor adjustment costs that result in the retention of slack labor resources during periods of decreased demand. To assess the robustness of our main findings, we conduct an event analysis of labor union elections and find that SG&A cost stickiness decreases after firms experience new union certification. Cross-sectional tests also show that the effect of labor union strength on SG&A cost stickiness is more pronounced for firms that are in better financial condition, have higher analyst coverage, and have higher net operating assets. We find a similar effect of union strength on discretionary spending when examining R&D costs. Overall, we contribute to the literature by showing that organized labor has a significant effect on cost behavior, which has implications for financial statement users and financial forecasting.