Institutional Investor Activism and Employee Safety: The Role of Activist and Board Political Ideology

Organization Science, Forthcoming

36 Pages Posted: 2 Nov 2021

See all articles by Wei Shi

Wei Shi

University of Miami; University of Miami - Department of Management

Chongwu Xia

Xiamen University - Institute for Financial and Accounting Studies

Philipp Meyer-Doyle

INSEAD - Strategy

Date Written: September 22, 2021

Abstract

While prior research on shareholder activism has highlighted how such activism can economically benefit the shareholders of targeted firms, recent studies also suggest that shareholder activism can economically disadvantage non-shareholder stakeholders, notably employees. Our study extends this research by exploring whether shareholder activism by institutional investors (i.e., institutional investor activism) can adversely affect employee health and safety through increased workplace injury and illness. Further, deviating from the assumption that financially-motivated institutional investor activists are homogeneous in their goals and preferences, we investigate whether the influence of institutional investor activism on employee health and safety hinges on the political ideology of the shareholder activist and of the board of the targeted firm. Using establishment-level data, we find that institutional investor activism adversely influences workplace injury and illness at targeted firms, and that this influence is stronger for non-liberal shareholder activists and for firms with a non-liberal board. Our study contributes to shareholder activism research by highlighting how the political ideology of shareholder activists and boards affects the impact of shareholder activism on stakeholders, and how shareholder activism can adversely affect the health and safety of employees. Further, our paper also contributes to research on workplace safety and the management of employee relations and human capital resources by highlighting the detrimental effect of a firm’s ownership by investor activists on its employees, and how the board’s political ideology may enable a firm to reduce this risk.

Keywords: Shareholder activism, political ideology, institutional investor, human capital, employees, workplace safety

Suggested Citation

Shi, Wei and Shi, Wei and Xia, Chongwu and Meyer-Doyle, Philipp, Institutional Investor Activism and Employee Safety: The Role of Activist and Board Political Ideology (September 22, 2021). Organization Science, Forthcoming , Available at SSRN: https://ssrn.com/abstract=3928261

Wei Shi

University of Miami ( email )

FL FL
United States

University of Miami - Department of Management ( email )

United States

Chongwu Xia

Xiamen University - Institute for Financial and Accounting Studies ( email )

Xiamen, Fujian 361005
China

Philipp Meyer-Doyle (Contact Author)

INSEAD - Strategy ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore

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