Peer Pressure: Do Non-unionized Firms Reduce Disclosures in Response to Peer Unionization?

In recent years, a significant portion of U.S. public firms have identified the existence of labor unions or the threat of unionization as a key risk factor in their 10-K filings.However, despite the recent surge in labor movements with high-profile campaigns,strikes, and renegotiations, the increasing popularity of unions has not translated intoan increased percentage of unionized workers. Practitioners and academicians have discussed many obstacles to unionization, but employers’ disclosure strategies that significantly limit the information available to unions have received little attention.Our proposed study aims to shed light on the dynamics of the unionization process from an “information sharing” perspective, by examining employers’ disclosure strategies as a potential obstacle to unionization. We specifically focus on non-unionized firms’ strategic disclosure changes when employees of a peer firm vote to unionize. We expect that, as a peer firm’s unionization event imposes a serious threat of unionization to non-unionized firms in the same industry, these non-unionized firms may strategically respond by reducing disclosures to limit the information useful for the union’s targeting or campaigning activities. To test this hypothesis, we plan to use union representation election data published by the National Labor Relations Board (NLRB), which allows a regression discontinuity design to mitigate endogeneity concerns, and examine various measures of disclosure quality or quantity, including financial statement disaggregation,the likelihood and frequency of management forecasts, the proportion of good news forecasts, and the length and readability of regulatory filings.Our proposed study is timely and important for two reasons. First, given the recent surge in labor movements, we are the first to examine employers’ disclosure strategies as a potential obstacle to unionization. Our results offer valuable insights for practitioners involved in pro- or anti-unionization activities, as well as for policymakers interested in the dynamics of the unionization process. Second, we contribute to several branches of academic literature including a vast literature on determinants of firm disclosures, the organized labor literature (especially the literature on the spill-over effect of peer unionization), and the literature on unionized firms adopting corporate finance and financial reporting strategies to maintain their information advantage over the unions.