CARF Seminar：Organized Labor and Inventory holdings
FinishedDate : 2019.06.14
Date & Time
Friday, June 14, 2019 16：00-17：30
Conference room, 2F Seminar Room 1, 1st floor of Economics Research Annex (Kojima Hall)
BOO CHUN JUNG, Ph.D.,
（Professor of Accounting, School of Accountancy, Shidler College of Business, University of Hawaii at Manoa）
The literature suggests that labor unions pose operational risk. In this paper, we find that managers stockpile buffer inventories in response to the operational risk associated with unions to maintain bargaining power in labor negotiations. This positive relation between union strength and inventory holdings is more salient when the relative costs of stock-out vs. excessive inventory holding is greater, when managers face more intense product market competition and thus a higher risk of sales loss, when it is more difficult to diversify labor disruption risks, when employees are not capable of delaying the effort, and when labor is more difficult to replace. Managers are shown to rely more on inventory stockpiling when they are restricted from using alternative disclosure strategies against unions. We further document that the potential benefit of excess inventory is in deterring strikes, while over-investment in inventory due to unions has on average undesirable effects on future financial performance both at the firm and the economy level.
Boo Chun Jung is a professor in Shidler College of Business at University of Hawaii at Manoa. His research area is Financial accounting, and his interests include cash holdings, dividend policy, credit ratings, capital structure, stock analysts’ forecasts, international accounting and more. Many of his research were published in leading accounting journals, which includes Journal of Accounting and Economics, Contemporary Accounting Research, Journal of Accounting, Auditing, Finance, Journal of Business, Finance, Accounting, and also Accounting and Business Research. He obtained his Bachelor and Master’s degree in Business Administration from Seoul National University, and received his Ph.D in Accounting from University of Colorado at Boulder.