Abstract
We examine the relation between CEO risk taking equity incentives, as captured by CEO vega, and workplace misconduct. Workplace misconduct includes health and safety violations, non-compliance with labor laws, and other violations broadly related to labor exploitation, and results in significant economic costs. Using regression analysis, matched sample tests, and a quasi-natural experiment we find a positive relation between CEO vega and workplace misconduct. We identify a reduction in discretionary expenses and increased pressure on employees to perform as potential channels through which CEO vega affects workplace misconduct. These results suggest that CEO risk taking equity incentives strategically affect operational decision making.
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