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Rank-and-File Employee Stock Options and Workplace Safety

Author

Listed:
  • Yangyang Chen

    (Department of Accountancy, City University of Hong Kong, Hong Kong, China)

  • Emmanuel Ofosu

    (Department of Accountancy, Lingnan University, Hong Kong, China)

  • Don O’Sullivan

    (Melbourne Business School, The University of Melbourne, Carlton, Victoria 3053, Australia)

  • Madhu Veeraraghavan

    (T A Pai Management Institute, Manipal Academy of Higher Education, Manipal, Karnataka 576104, India)

  • Leon Zolotoy

    (Melbourne Business School, The University of Melbourne, Carlton, Victoria 3053, Australia)

Abstract

We provide robust evidence that rank-and-file employee stock options (R&F options) lead to lower work-related injury rates. This finding is consistent with the view that R&F options improve workplace safety by facilitating employee retention and cooperation. To establish causality, we employ difference-in-differences analysis around the passage of FAS 123R option expensing regulation and instrumental variable estimation. In cross-sectional analysis, we find that the documented effect is amplified among firms with higher labor mobility rates and among firms with greater scope for employee free riding. The results of supplemental analysis suggest that work-related injuries adversely impact firm performance and rule out reduced employee whistleblowing about workplace safety issues as an alternative mechanism driving our findings.

Suggested Citation

  • Yangyang Chen & Emmanuel Ofosu & Don O’Sullivan & Madhu Veeraraghavan & Leon Zolotoy, 2025. "Rank-and-File Employee Stock Options and Workplace Safety," Management Science, INFORMS, vol. 71(7), pages 5971-5996, July.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:7:p:5971-5996
    DOI: 10.1287/mnsc.2022.02072
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