Do Managers Withhold Good News from Labor Unions?

With scarce empirical support, prior literature argues that managers tend to withhold good news and promote bad news to preserve their bargaining power against labor unions. This paper provides empirical evidence of this rarely supported argument. Using comprehensive firm-level data from South Korea, where labor unions have a long tradition of making credible threats, we find that overall disclosure frequency is negatively related to labor union strength, and that this relation is more pronounced in firms with good news. We also find that firms with strong labor unions withhold good news during the labor negotiation period and release it in a gradual fashion afterward and that this pattern is more prominent than that of firms with weak or no unions, implying that managers time news disclosures according to bargaining schedules to achieve better outcomes in labor negotiations. These results are robust to various sensitivity tests.