Collective Bargaining and Strategic Disclosure in Earnings Conference Calls

Abstract

Prior studies provide evidence that unionized firms tend to have more negative disclosure than non-unionized firms. These studies interpret this behavior as managers of unionized firms manipulating disclosure to gain an advantage in collective bargaining but do not directly test this assumption. An alternative explanation is that unionized firm managers disclose their union-deflated prospects. Using measures designed to represent disclosure manipulation, we find that (a) managers of unionized firms tend to script their answers in conference calls to a greater extent when union-related proprietary costs are higher, (b) unionized firm managers actively cast earnings calls with unfavorable analysts before labor negotiations, and (c) when union-related proprietary costs are higher, a larger share of managers’ negative language occurs in sentences with linguistic cues of deception. Our findings suggest that managers of unionized firms manipulate disclosure to mitigate union-related proprietary costs.