Institutional Ownership and Labor-Related Misconduct: Evidence from U.S. Federal Violations

56 Pages Posted: 27 Sep 2019 Last revised: 27 Mar 2020

See all articles by Xi Li

Xi Li

London School of Economics

Aneesh Raghunandan

London School of Economics

Date Written: March 23, 2020

Abstract

Using a novel, comprehensive dataset on penalties assessed by U.S. federal agencies for labor-related misconduct, we examine the effect of institutional investors on firms’ employee practices. We find that institutional ownership is negatively associated with the likelihood of firms receiving federal penalties for violating labor laws. Additional analyses suggest that institutions are mainly motivated by financial rather than social reasons. Although the direct penalty amounts are small, violating firms face a higher likelihood of employee lawsuits in subsequent years and suffer from reputational damage. Such firms also experience negative stock returns.

Keywords: Institutional Ownership, Employees, Labor Practices, Violation, Misconduct

Suggested Citation

Li, Xi and Raghunandan, Aneesh, Institutional Ownership and Labor-Related Misconduct: Evidence from U.S. Federal Violations (March 23, 2020). Available at SSRN: https://ssrn.com/abstract=3460126 or http://dx.doi.org/10.2139/ssrn.3460126

Xi Li

London School of Economics ( email )

Department of Accounting
Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://www.lse.ac.uk/accounting/people/xi-li

Aneesh Raghunandan (Contact Author)

London School of Economics ( email )

United Kingdom

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