Organized labor and information asymmetry in the financial markets

Organized labor and information asymmetry in the financial markets Prior results from the labor relations literature suggest that revealing information weakens management’s position in collective bargaining. Thus, when facing organized labor, management has an incentive to preserve the information asymmetry with outsiders. This study uses a sample from a large cross-section of the economy over several years to test this relation. Results are consistent with this prediction. Strong organized labor is associated with higher bid-ask spreads, higher probability of informed trading, lower trading volume and lower analyst coverage. These relations hold after controlling for numerous factors such as growth opportunities or risk. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Organized labor and information asymmetry in the financial markets

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Publisher
Kluwer Academic Publishers-Plenum Publishers
Copyright
Copyright © 2006 by Springer Science+Business Media, LLC
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-006-9015-y
Publisher site
See Article on Publisher Site

Abstract

Prior results from the labor relations literature suggest that revealing information weakens management’s position in collective bargaining. Thus, when facing organized labor, management has an incentive to preserve the information asymmetry with outsiders. This study uses a sample from a large cross-section of the economy over several years to test this relation. Results are consistent with this prediction. Strong organized labor is associated with higher bid-ask spreads, higher probability of informed trading, lower trading volume and lower analyst coverage. These relations hold after controlling for numerous factors such as growth opportunities or risk.

Journal

Review of Accounting StudiesSpringer Journals

Published: Oct 3, 2006

References

  • CEO stock option awards and the timing of corporate voluntary disclosures
    Aboody, D.; Kasznik, R.
  • Analyst coverage and financing decisions
    Chang, X; Dasgupta, S; Hilary, G
  • Information effects on the bid-ask spread
    Copeland, T. E.; Galai, D.
  • Optimal release of information by firms
    Diamond, D.
  • Disclosure, liquidity and the cost of capital
    Diamond, D.; Verrecchia, R. E.
  • The use of accounting flexibility to reduce labor renegotiation costs and manage earnings
    D’Souza, J.; Jacob, J.; Ramesh, K.
  • One day in the life of a very common stock
    Easley, D.; Kiefer, N. M.; O’Hara, M.
  • Reporting bias
    Fisher, P. E.; Verrecchia, R. E.
  • Management communications with securities analysts
    Francis, J.; Hanna, J. D.; Philbrick, D. R.
  • The economic implications of corporate financial reporting
    Graham, J. R.; Harvey, C. R.; Rajgopal, S.
  • Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature
    Healy, P. M.; Palepu, K. G.
  • A theory of trading volume
    Karpoff, J. M.

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