Rank-and-File Employee Stock Options and Workplace Safety

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. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.02072 .