DescriptionThere is an emerging literature linking finance to employment. My dissertation focuses on a combination of institutional investors, family firms, which are corporate finance topics and layoff decisions--which is a labor economics topic. The first essay examines institutional investors can play an important role on the firm’s layoff decisions. This study uses a hand-collected dataset of employee layoff announcements from 1983 to 2008, to examine the relationship between layoffs and institutional ownership. First, I find that firms with high institutional ownership are more likely to lay off employees. Furthermore, I study the effect of investor horizon on the layoff decisions. I find that the likelihood of layoffs is positively related to ownership by long-term institutional investors who have greater incentives for monitoring that result in layoffs. The propensity to lay off employees is also increasing in public pension fund ownership. Firms with high local institutional ownership are less likely to lay off employees consistent with the presence of local social and political pressure. Finally, I find that the market perceives layoff announcements made by firms with more long-term institutional investors, public pension funds and non-local institutions positively, in comparison with layoffs by firms with more short-term institutional investors, non-public pension funds and local institutions. The second essay explore whether there is difference in employment policy between family firms and non-family firms. Using large hand-collected layoff samples during 2002-2008, I find that family firms are less likely to reduce employees than non-family firms. The lower propensity for layoffs in family firms is robust to a host of controls for firm characteristics and economic conditions. This lower propensity for layoffs is not explained by differences in how family and non-family firms respond to economic difficulties. However, the lower propensity for layoffs in family firms is stronger when 1) the founder owners are in control and 2) when the firm is located in less populated counties. This suggests that managers in family firms provide an implicit contract ensuring job security to employees.