Institutional Monitoring and Litigation Risk: Evidence from Employee Disputes

Networks Financial Institute Working Paper Series 2019-WP-02

54 Pages Posted: 2 Aug 2019

See all articles by Blake Rayfield

Blake Rayfield

Indiana State University - Scott College of Business; Networks Financial Institute

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance

Date Written: July 30, 2019

Abstract

In this study, we investigate how institutional investors help mitigate business-related risks in a corporate environment. Using a large sample of employment disputes, litigations, and court cases, we find that institutional investors play a significant role in reducing employment litigation. We observe that firms with larger shares of institutional ownership have a lower incidence of employment lawsuits and that long-term institutional investors are more effective at decreasing employee mistreatment. Our results suggest that institutional investors can improve the employee work environment and help mitigate future employee litigation. The improvement of employee work conditions has been shown to increase a firm’s value through increased employee output, reduced litigation, and direct and indirect costs. Our results shed light on the effectiveness of institutional monitoring on a firm’s litigation risk.

Keywords: Institutional Investors; Litigation; Labor Relations; Firm Value

JEL Classification: G30, G39, G23, K40

Suggested Citation

Rayfield, Blake and Unsal, Omer, Institutional Monitoring and Litigation Risk: Evidence from Employee Disputes (July 30, 2019). Networks Financial Institute Working Paper Series 2019-WP-02, Available at SSRN: https://ssrn.com/abstract=3429197

Blake Rayfield (Contact Author)

Indiana State University - Scott College of Business ( email )

800 Sycamore Street
Terre Haute, IN 47809
United States

Networks Financial Institute ( email )

Indianapolis, 46208
United States

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance ( email )

315 Turnpike St
North Andover, MA 01845
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
23
Abstract Views
224
PlumX Metrics