Labor Voice in Corporate Governance: Evidence from Opportunistic Insider Trading

72 Pages Posted: 25 Mar 2020 Last revised: 26 Jan 2021

See all articles by Lilian Ng

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Man Duy (Marty) Pham

The University of Western Australia

Jing Yu

The University of Sydney; Financial Research Network (FIRN)

Date Written: August 10, 2020

Abstract

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.

Keywords: Opportunistic Insider Trading, Labor Unions, Employees, Employee Opportunism, Corporate Governance

JEL Classification: G14, G31, M54

Suggested Citation

Ng, Lilian and Pham, Man and Yu, Jing, Labor Voice in Corporate Governance: Evidence from Opportunistic Insider Trading (August 10, 2020). European Corporate Governance Institute – Finance Working Paper No. 724/2021, Available at SSRN: https://ssrn.com/abstract=3549406 or http://dx.doi.org/10.2139/ssrn.3549406

Lilian Ng (Contact Author)

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Man Pham

The University of Western Australia ( email )

35 Stirling Highway
Crawley, WA 6009
Australia

Jing Yu

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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