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Review of Managerial Science
Erschienen in: Review of Managerial Science 3/2020

22.09.2018 | Original Paper

Employee lawsuits and capital structure

verfasst von: Omer Unsal, M. Kabir Hassan

Erschienen in: Review of Managerial Science | Ausgabe 3/2020

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Abstract

We examine the effect of litigation on corporate capital structure by using a unique, hand-collected dataset of 30,841 employee disputes (after initial court hearings) between 2000 and 2015. We find that employee lawsuits increase firms’ leverage ratios, and firms with frequent employee allegations maintain high leverage ratios. The positive relationship between employee allegations and leverage also exists when we use other workplace-related violations, inspections, and complaints. Overall, our findings highlight the importance of employee treatment in the workplace environment.
Vorheriger Artikel Firm age dynamics and causes of corporate bankruptcy: age dependent explanations for business failure

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Fußnoten
1
Bloomberg Law Reports.
 
5
Another Day, Another Walmart Class Action Employee Lawsuit, https://​www.​thebalancesmb.​com/​walmart-classic-action-employee-lawsuits-3974960.
 
6
Class Action and Individual Retail Employee Lawsuits, Settlements, Legal Actions, https://​www.​thebalancesmb.​com/​retail-employee-lawsuits-4061835.
 
11
Hiscox Guide to Employee Lawsuits.
 
12
We work with 30,756 cases since some cases (appx. 85 cases) are still ongoing.
 
19
Our results remain the same when we use long-term debt normalized by assets, as well as market leverage, which is the book value of long-term debt plus debt in current liabilities, divided by market value of debt and equity plus debt in current liabilities plus market value of equity.
 
20
Standard errors are clustered at firm level.
 
26
In untabulated results, our findings remain the same when we match firms using number of employees or market capitalization for firm-size proxy.
 
27
Our results remain the same when we use long term debt normalized by assets as well as market leverage, which is the book value of long-term debt plus debt in current liabilities, divided by market value of debt and equity plus debt in current liabilities plus market value of equity.
 
28
Standard errors are clustered at firm level.
 
29
2015 Hiscox Guide to Employee Lawsuits.
 
30
EEOC v. CRST Van Expedited, Iowa, 2013.
 
31
We work with 30,756 cases since some cases (appx. 85 cases) are still ongoing.
 
32
September 2014, Advisen Ltd.: A spotlight on the United States Employment Practices Liability Insurance market.
 
33
Our results quantitatively remain the same when we only work with firms with employee lawsuits.
 
34
Our sample size increases to 102,622 which includes all firms; lawsuit firms (firms can face more than 1 lawsuit in a year) and non-lawsuit firms. If a firm is not facing any lawsuit, we replace case duration by zero. By doing that, we can measure the effect of each additional day on leverage. In panel B, we only work with lawsuit firms, where we employ 30,756 unique cases.
 
35
Washington Post: Why wage and hour litigation is skyrocketing, November 25, 2015.
 
36
NERA Economic Consulting: Trends in Wage and Hour Settlements: 2015 Update.
 
38
Barry Hirsch (Andrew Young School of Policy Studies, Georgia State University) and David Macpherson (Department of Economics, Trinity University), created the Union Membership and Coverage Database, which is available at www.​unionstats.​com.
 
39
The rating ranges from A + (quantified as 8) to liquidation status (quantified as 1).
 
40
Our results remain quantitatively the same when we match based on market capitalization or number of employee as size proxy.
 
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Metadaten
Titel
Employee lawsuits and capital structure
verfasst von
Omer Unsal
M. Kabir Hassan
Publikationsdatum
22.09.2018
Verlag
Springer Berlin Heidelberg
Erschienen in
Review of Managerial Science / Ausgabe 3/2020
Print ISSN: 1863-6683
Elektronische ISSN: 1863-6691
DOI
https://doi.org/10.1007/s11846-018-0304-1

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