Drawing on the literature in social movement theory, signaling theory, and legal studies, we examine how investors evaluate large-scale labor protests in China during 2011–2012, following the introduction of the Social Insurance Law– a top-down institutional change aimed at promoting sustainable growth and the rule of law. We argue that rights-based protests (defending legal rights) provided positive market signals, unlike interest-based protests (seeking higher wages). Rights-based protests indicate institutional change, reducing institutional ambiguity and providing social and economic stability. This effect is stronger with active labor NGOs in the region, socially harmonious local governments, and firms aligning with state-driven institutional change. Furthermore, we argue that these conditions are consistent with the collective bargaining structure in Chinese labor laws. Our unique dataset supports our arguments.
