This paper examines the link between rank-and-file employees’ unemployment concerns and financial reporting opacity. Following Agrawal and Matsa (JFE, 2013), we use exogenous variations in state unemployment insurance benefits to capture changes to unemployment concerns. We find that when unemployment concerns are lower, there is less opaque financial reporting. This relation is stronger when workers face higher unemployment risk, labor union participation is high, and executives have higher equity incentives. Using Tobin’s Q to capture firm value, we also find that the economic rationale to engage in opaque financial reporting reduces when unemployment benefits are high. Our findings suggest that labor market policies have a significant, likely unintended, positive externality on corporate reporting.
Opacity, Transparency, Financial Reporting, Unemployment insurance
Accounting | Corporate Finance
Corporate Reporting and Disclosure
European Accounting Association 38th Annual Congress 2015, April 28-30, Glasgow; American Accounting Association Annual Meeting 2015, August 8-12
City or Country
NG, Jeffrey; RANASINGHE, Tharindra; SHI, Guifeng; and YANG, Holly I..
Opaque Financial Reporting due to Unemployment Concerns. (2015). European Accounting Association 38th Annual Congress 2015, April 28-30, Glasgow; American Accounting Association Annual Meeting 2015, August 8-12. 1-47. Research Collection School Of Accountancy.
Available at: http://ink.library.smu.edu.sg/soa_research/1431
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