The Effectiveness of OSHA Penalties: A Stock-Market-Based Test

This study examines shareholder reactions to the announcements of OSHA penalties in the press over the years 1979-89. The analysis demonstrates that investors react negatively to the announced sanctions over the time interval immediately surrounding the announcement day. The decreases in the values of the subject firms are, however, found to be unrelated to the relative size of the penalty, to the number of non-record-keeping violations, and to whether the penalties were attributable to employee injury or death. The findings suggest that for the stockholders the nature of the announced OSHA sanctions is largely irrelevant, and they further point toward a reassessment of the assumed deterrent impact of the penalities.