The Impact of Unions on Information Asymmetry

Prior literature documents a positive association between union power, calculated using industry-level union data, and information asymmetry. Prior literature also finds a mitigating effect from employee ownership on the negative association between union power and voluntary disclosure. Using a sample of company observations for fiscal years 2008 through 2010, I examine the effect of company-specific measures of employee unionization on market-based measures of information asymmetry (proxied for by insider trading activity, analyst following, and analyst dispersion). I also examine whether employee ownership impacts the effect of company-specific measures of employee unionization on my market-based measures of information asymmetry. I find mixed results that provide ambiguous evidence about whether employee unionization affects information asymmetry and whether employee ownership affects the impact of employee unionization on information asymmetry. These results suggest that industry-level unionization measures provide differing results from company-specific unionization measures and that the impact of unions on information asymmetry is unclear. These findings should be useful in the current debate about the ultimate costs and benefits of unionization