Labor Voice in Corporate Governance: Evidence from Opportunistic Insider Trading
72 Pages Posted: 25 Mar 2020 Last revised: 26 Jan 2021
Date Written: August 10, 2020
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: Suggested Citation