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.
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Research Article|
March 24 2021
Organized Labor and Inventory Stockpiling
Daniel G. Yang
Daniel G. Yang
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The Accounting Review TAR-2018-0117.
Article history
Received:
March 02 2018
Accepted:
February 18 2021
Citation
Sophia J.W. Hamm, Boo Chun Jung, Woo-Jong Lee, Daniel G. Yang; Organized Labor and Inventory Stockpiling. The Accounting Review 2021; doi: https://doi.org/10.2308/TAR-2018-0117
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