Heterogeneous institutional investors and labor investment decisions: does product market competition matter?

Sabrina Khemiri (), Afef Slama, Hamza Nizar and Faten Lakhal ()
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Sabrina Khemiri: LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], IMT-BS - DEFI - Département Droit, Économie et Finances - TEM - Télécom Ecole de Management - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]
Afef Slama: LAMIDED, ISG, Université de Sousse
Hamza Nizar: PRESTIGE Labo, IHEC- University of Carthage
Faten Lakhal: DVRC - De Vinci Research Center - DVHE - De Vinci Higher Education

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Abstract: This paper investigates how institutional investors and their heterogeneity affect the efficiency of corporate labor investments. Based on a sample of French-listed companies over the period 2008 - 2018, the results show that abnormal net hiring, measured as the absolute deviation from net hiring predicted by economic fundamentals, decreases in presence of institutional investors, particularly active ones. This result suggests that institutional investors have incentives to engage in effective monitoring, which reduces agency conflicts in labor investment choices. This result holds both for institutional cross-owners with significant concomitant stakes in rivals' companies and for institutional investors gaining board representation within investee firms. The results also show that the monitoring role of institutional investors is more pronounced for firms facing higher external market discipline. Overall, our findings are robust to alternative model specifications and to endogeneity concerns and suggest that institutional investors play an important role in firm-level employment decisions.

Keywords: Institutional investors; Active investors; Passive investors; Labor investment efficiency; Product market competition (search for similar items in EconPapers)
Date: 2023-06-14
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Published in EURAM 2023 : European Academy of Management Conférence. "Transform Business for Good", Jun 2023, Dublin, Ireland

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04148788

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