We examine whether operating inflexibility posed by labor unions affects goodwill impairment. We predict such inflexibility hinders resource reallocation after acquisition, thereby preventing the acquiring firm from realizing synergies included in goodwill. Consistent with this prediction, we...

We study labor unions, an important stakeholder group that has not been a focus of the earnings smoothing literature. We posit that managers strike a balance between sheltering resources from employees’ profit sharing demands and catering to employees’ aversion to downside risk by smoothing...