Ethical Leadership in the 21st Century

The issue of labour law reforms is an important institutional intervention that has long-run effects on the behaviour of firms, employment relations and financial markets outcomes. The integration of various labour legislations into new comprehensive labour codes in such emerging economies as India is a major regulatory change that tries to enhance labour market efficiency, compliance and formalisation. Although much has been done to analyse the economic and social impact of labour regulations, little empirical research has been undertaken to establish the response of equity markets to these reforms. This paper examines the stock market response to significant announcements of labour laws reform in India, by considering the reforms as value-relevant regulatory signals, which affect the expectations of investors in corporate profitability, cost structure and risk in the regulation.