Labor Voice in Corporate Governance: Evidence from Opportunistic Insider Trading

Labor Voice in Corporate Governance: Evidence from Opportunistic Insider Trading

Lilian Ng, Man Duy (Marty) Pham, Jing Yu

Series number :

Serial Number: 
724/2021

Date posted :

January 07 2021

Last revised :

January 22 2021
SSRN Share

Keywords

  • Opportunistic Insider Trading • 
  • labor unions • 
  • Employees • 
  • Employee Opportunism • 
  • Corporate governance

 This study examines whether labor plays a role in corporate governance by deterring opportunistic insider behavior.  Results suggest that firms with organized labor experience statistically significant declines in opportunistic insider trading activity and profitability.

We show three economic mechanisms that explain labor's disciplinary effect on opportunistic insider trading behavior: employee welfare, activist union-affiliated institutional investors, and media and political support. Further analyses suggest that labor's corporate governance reduces the incidence of illegal insider trading, enhances firm productivity and performance, and lowers insider trades' return predictability.

Authors

Real name:
Man Duy (Marty) Pham
Real name:
Research Member
Schulich School of Business, York University
Real name:
Jing Yu