The Relationship between Labor Union and Advertising Expenditures: A Focus on Distribution Firms

Abstract

Purpose: The aim of this paper is to investigate whether labor unions are the main determinants of advertising expenditures and whether market competition has an impact on the relation between labor unions and advertising expenditures, focusing on distribution firms. Research design, data, and methodology: Using 914 observations of KOSPI market from 2001 to 2009 in distribution firms, this paper examines whether labor union is related to advertising expenditures, focusing on distribution firms. For this, this paper employs not only OLS regressions method but also 2SLS regressions method in which Female_Ratio(percentage of female employees) is used as instrumental. Results: This paper finds that in the distribution firms, labor union, as a major stakeholder of the company is, in terms of statistic, negatively associated with advertising expenditures. Also, market competition, in this paper, doesn‟t have real impact on the relation between labor unions and advertising expenditures. Conclusions: This paper presents the influence of labor unions, as a major factor in determining advertising expenditures. An executive who understands that as the amount of advertising expenditure increases, the total pie of wages to be attributed to the members of labor union will decrease.