The Heterogeneous Effect of the Passage of the Occupational Safety and Health Act on Stock Returns

I analyze how stock prices reacted to the passage of the Occupational Safety and Health Act (OSHA) of 1970. Previous studies focus on accounting measures or actual OSHA violations, and my work complements the literature by examining how shareholders expected OSHA to affect firm profitability. Returns fell around the OSH bill’s release to the House floor and its eventual passage, and average market value dropped by $1.5 million over the 3 days surrounding House Rules Committee release. Durable manufacturing and mining industries were hardest hit in OSH passage, losing $2.6 million and $5.7 million in average market value, respectively. I also find that larger firms with poorer working conditions sustained more negative returns, and market power, not union density, explains variation in expected profitability. Furthermore, future penalties appear unrelated to shareholder expectations about compliance costs.

Sherrilyn M. BillgerEmail: