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Review of Quantitative Finance and Accounting

24.06.2023 | Original Research

Employee treatment and firm performance: evidence from topic modelling in lawsuit announcements

verfasst von: Omer Unsal, M. Kabir Hassan

Erschienen in: Review of Quantitative Finance and Accounting

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Abstract

This study uses a machine learning technique to assess whether employee lawsuits are informative in predicting firm performance. Using a Bayesian topic modelling algorithm, we examine a large collection of employee lawsuit announcements between 2000 and 2016. We extract the key topics of lawsuit announcements via a text mining approach of latent Dirichlet allocation. We document that the algorithm generates semantically accurate topics that are predictive of future firm value. We find that announcements of lawsuits with topics of discrimination or injury and death have a considerable effect on firms’ future profitability. In addition, our results suggest that settlement amounts, attorney fees, and other legal expenditures stated in announcements are negatively associated with firm performance. Our results are robust to alternative topic definitions and data specifications.

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Fußnoten
5
Employee Lawsuits: Costs, types of suits and 2017 employment law issues in review: https://​www.​theeap.​com/​regulatory/​employee-lawsuits-costs-types-suits-2017-employment-law-issues-review.
 
6
Other lawsuits are about securities, patent, environmental, or contracting related issues.
 
7
We are grateful to Carlo Schwarz for his work in LDA analysis https://​warwick.​ac.​uk/​fac/​soc/​economics/​staff/​crschwarz/​.
 
8
46,988 refers to both lawsuit and non-lawsuit firms matched in “panel data” format. Each lawsuit firm is matched to a non-lawsuit firm (based on total assets and book-to-market in the same industry), where we keep all the years between 2000 and 2016 regardless the year of lawsuit. And because one firm can face multiple charge among years, our sample size increases to 46,308. Similarly, 10,629 represents each lawsuit firm is matched with a non-lawsuit firm (in cross sectional, no panel data) where firms can face more than one lawsuit a year, therefore, our sample increases to 10,629.
 
11
Each firm is matched to a non-lawsuit (or non-labor related announcement firm) by either in panel (year and firm) format or cross sectional (one-to-one) format (while firms can face multiple announcements) in a year. By performing different matched samples (firm and year, cross sectional, only lawsuit, both lawsuit and non-lawsuit), we aim to eliminate any unobserved firm heterogeneity and sample selection bias.
 
25
https://​www.​justice.​gov/​opa/​pr/​tyson-foods-pleads guilty-and-agrees-pay-fine-osha-violation-led-worker-death.
 
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Metadaten
Titel
Employee treatment and firm performance: evidence from topic modelling in lawsuit announcements
verfasst von
Omer Unsal
M. Kabir Hassan
Publikationsdatum
24.06.2023
Verlag
Springer US
Erschienen in
Review of Quantitative Finance and Accounting
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-023-01168-x