This paper aims to investigate how firms’ relationships with employees define their debt maturity. The authors empirically test the role of employee litigations in influencing…
Abstract
Purpose
This paper aims to investigate how firms’ relationships with employees define their debt maturity. The authors empirically test the role of employee litigations in influencing firms’ choice of short-term versus long-term debt. The authors study employee relations by analyzing the importance of the workplace environment on capital structure.
Design/methodology/approach
The author’s test hypotheses using a sample of US publicly traded firms between 2000 and 2017, including 3,056 unique firms with 4,256 unique chief executive officer, adopting the fixed effect panel model.
Findings
The authors document that employee litigations have a significant negative effect on the use of short-term debt and a significant positive affect on long-term debt. Employee litigations, along with legal fees, outcomes and charging parties, matter the most in explaining debt maturity. In addition, frequently sued firms abandon the short-term debt market and use less shareholders’ equity to finance their operations while relying more on the longer debt market.
Originality/value
To the best of the authors’ knowledge, this is the first study to examine the role of employee mistreatment in debt maturity choice. The study extends the lawsuit and finance literature by examining unique, hand-collected data sets of employee lawsuits, allegations, violations, settlements, charging parties, case outcomes and case durations.
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Jennifer Brodmann and Omer Unsal
The authors examine the impact of employee litigation on Securities Action Lawsuits. The authors study whether frequently sued firms are more likely to be investigated by…
Abstract
Purpose
The authors examine the impact of employee litigation on Securities Action Lawsuits. The authors study whether frequently sued firms are more likely to be investigated by Securities Exchange Commission (SEC). The authors study how labor relations are crucial to corporate governance.
Design/methodology/approach
The authors use hand-collected datasets of employee violations, misconducts and lawsuits and test whether bad employee treatment increases the likelihood of SEC probe. The authors' methodology includes panel fixed effects, as well as alternative measures of employee mistreatment and SEC case.
Findings
The authors find that with each increase in employee dispute increases the likelihood of the firm being investigated by the SEC. The authors find that geographically dispersed firms are more likely to be investigated by the SEC when facing employee disputes and that more labor union coverage and a higher unemployment rate triggers more employee allegations and labor-related lawsuits.
Originality/value
The authors' study is the first to investigate how employee relations affect firms involving federal investigation. The authors aim to contribute to the literature by studying (i) the relation between employee mistreatment and legal challenges, (ii) how firm characteristics affect the path from employee disputes to securities class actions and (iii) the impact of employee mistreatment on the corporate governance.
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This study aims to explore the impact of employee litigation on the innovation output of firms, specifically within the pharmaceutical sector, by examining the relationship…
Abstract
Purpose
This study aims to explore the impact of employee litigation on the innovation output of firms, specifically within the pharmaceutical sector, by examining the relationship between employee lawsuits and Food and Drug Administration (FDA) product approvals.
Design/methodology/approach
Utilizing a hand-collected dataset comprising 2,293 employee disputes, this research conducts an empirical analysis to test how litigation involving employees influences the rate of FDA approvals for new pharmaceutical products.
Findings
The analysis reveals that employee disputes are negatively associated with the number of FDA-approved products, indicating that firms facing frequent employee allegations tend to exhibit lower innovation outcomes. Further, the study identifies case characteristics, such as the involvement of labor unions and the duration of cases, as significant determinants that delay the FDA approval process, thereby adversely affecting innovation performance.
Research limitations/implications
While the study provides novel insights into the relationship between employee litigation and innovation in the pharmaceutical industry, the findings are contingent upon the accuracy of the dataset and may not be universally applicable across all sectors.
Practical implications
The results underscore the critical importance of maintaining a positive workplace environment and treating employees fairly to foster innovation performance. Firms are encouraged to adopt strategies that mitigate the risk of litigation to enhance their innovation capabilities.
Originality/value
This research contributes to the literature by offering empirical evidence on the detrimental effects of employee litigation on firms’ ability to innovate, particularly in the highly regulated pharmaceutical industry. It highlights the significance of workplace relations in influencing a firm’s innovation outcomes.
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The purpose of this paper is to use a unique, hand-collected data set of Food and Drug Administration (FDA)-approved products to understand the effect of lobbying on the product…
Abstract
Purpose
The purpose of this paper is to use a unique, hand-collected data set of Food and Drug Administration (FDA)-approved products to understand the effect of lobbying on the product market. The authors gather total 86,462 FDA labels including drug patents, drugs, pre-market approvals and medical devices and test the relationship between lobbying and future firms’ product submissions.
Design/methodology/approach
Using a sample of 86,462 FDA labels including drug patents, drugs, pre-market approvals and medical devices, the authors test the effect of lobbying on a firm’s future product submissions using survival analysis, logit, difference-in-differences and propensity score matching techniques.
Findings
The authors find lobbying firms experience an increase in the number of medical products approved. However, increased number of FDA labeling comes at the cost of product failure. The authors document that lobbying increases product recalls when responsible firms are associated with higher market withdrawals.
Originality/value
This study contributes to both the management literature on corporate lobbying and product recalls. Additionally, the study reveals the connection between pharmaceutical lobbying and firm value.
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The aim of this study is to discuss the idea that the legal cost of environmental violations, along with reputational concerns, may persuade firms to generate more green patents.
Abstract
Purpose
The aim of this study is to discuss the idea that the legal cost of environmental violations, along with reputational concerns, may persuade firms to generate more green patents.
Design/methodology/approach
This study examines the relationship between firms generating green patents and environmental violations. The authors show the green innovation trend over the past two decades and explore the potential motivations behind it. In addition, the authors investigate the impact of regulatory actions, such as governmental finds, on green innovation.
Findings
The authors find that firms that commit environmental violations switch to producing green patents in the long-run. The authors also document that market reaction following environmental offenses is negative for firms with a high ratio of green patents in their portfolio.
Originality/value
This study explores innovation. The authors investigate the literature and trends of green innovation over the past 20 years. The authors also find that green innovation is growing at a relatively slow rate. Overall, this study highlights the importance of green innovation and firms’ response to corporate wrongdoing.
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In this paper, the author utilizes a unique hand-collected dataset of workplace lawsuits, violations and allegations to test the relation between employee mistreatment and…
Abstract
Purpose
In this paper, the author utilizes a unique hand-collected dataset of workplace lawsuits, violations and allegations to test the relation between employee mistreatment and information asymmetry.
Design/methodology/approach
The author tests the impact of employee treatment on firms' information environment by utilizing the S&P 1500 firms of 17,663 firm-year observations, which include 2,992 unique firms and 5,987 unique CEOs between 2000 and 2016. These methods include panel fixed effects, as well as alternative measures of information asymmetry, event study and matched samples for further robustness tests.
Findings
The author finds that employee disputes exacerbate the information flow between insiders and outsiders. Further, the author reports that case characteristics, such as case outcome and case duration, aggravate that problem. The author documents that the positive relationship between employee mistreatment and information asymmetry is stronger for small firms and firms with smaller market power, as well as firms with a high level of equity risk.
Originality/value
This study is the first to investigate how employee relations influence a firm's information asymmetry. The author aims to contribute to the literature by studying (1) the relation between information asymmetry and employee mistreatment, (2) how firm characteristics affect the path from employee disputes to information asymmetry and (3) the influence of various other types of evidence of employee mistreatment beyond litigation on the information environment.
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Dongnyoung Kim, Inchoel Kim, Thomas M. Krueger and Omer Unsal
This article aims to examine the influence of chief executive officer (CEO) internal political beliefs on labor relations. Prior research has paid little attention to channels…
Abstract
Purpose
This article aims to examine the influence of chief executive officer (CEO) internal political beliefs on labor relations. Prior research has paid little attention to channels through which the internal personal value system of managers enhances or deteriorates firm value. The authors provide evidence consistent with CEOs adopting labor policies impacting incumbent management–labor relationships based upon their political ideologies.
Design/methodology/approach
The research design tests the impact of CEO political ideology on labor relation using an individual CEO’s personal information and firm affiliation, employee lawsuit information, financial contributions to candidates and committees, and firm financial information. The authors compiled a sample of 4,354 unique CEOs from 2,558 US firms that are covered by ExecuComp and used 18,404 firm-year observations for the study’s analysis. A Heckman two-stage estimation process is used to address a potential sample selection bias and match the requirements of exclusion and relevance criteria.
Findings
Findings indicate that firms led by Republican-leaning CEOs are more likely to be sued by their employees, especially for violating union rights. Moreover, the findings of the study uncovered that Republican-leaning CEOs have fewer cases dismissed or withdrawn compared to Democrat-leaning CEOs and are also less likely to settle court cases prior to trial. Results indicate that Republican-leaning CEOs are associated with more substantial decreases in firm value compared to Democrat-leaning CEOs when facing labor allegations. The authors further show that firm value is lower for all firms facing litigation, with the magnitude of the decrease being more pronounced for firms with Republican CEOs.
Research limitations/implications
Firm affiliations are identified using ExecuComp, employee lawsuit information from the National Labor Relations Board (NLRB), financial contributions to candidates and committees from the Federal Election Committee (FEC) website, and financial information from Compustat. To the extent that these websites are inaccurate, such as financial contributions being underreported, the findings reported here may understate the relationships reported in this article.
Practical implications
The authors capture CEO political ideology using political contributions. There may be other means, such as physical space and personal effort, by which one could also estimate the party and intensity of CEO political ideology. This information is unavailable.
Social implications
While presidential politics has four-year cycles, managerial finance is a daily activity. While political affiliation is most clearly measurable through monetary contributions, one can see implications of manager political leaning through their relationship with labor throughout the election cycle.
Originality/value
The analyses of this study indicate that labor unions are more likely to sponsor lawsuits and stronger allegations in firms with Republican CEOs and show that withdrawal, settlement or dismissal rates are lower when firms are managed by Republican managers, resulting in higher subsequent legal costs and potentially damaged employee morale. Also, this paper investigates whether lawsuits have a greater negative consequence on firm value when the firm is run by a Republican CEO. The authors find that lawsuits significantly lower Tobin's Q for Republican-led firms compared to companies with Democratic and apolitical CEOs. The authors further show that firm value is lower for all firms facing litigation, with the magnitude of the decrease being more pronounced for firms with Republican CEOs.
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The authors study the relationship between CEO overconfidence and litigation risk by examining employee-level lawsuit data. The purpose of this paper is to better understand the…
Abstract
Purpose
The authors study the relationship between CEO overconfidence and litigation risk by examining employee-level lawsuit data. The purpose of this paper is to better understand the executive characteristics that potentially affect the likelihood of employee litigations.
Design/methodology/approach
The authors employ a unique data set of employee lawsuits from the National Labor Relations Board – “Disposition of Unfair Labor Practice Charges” – which includes complaints, litigations and decisions. The data spans the years 2000–2014. The authors employ the option-based CEO overconfidence metric of Malmendier et al. (2011) as the primary explanatory variable.
Findings
The authors find that overconfident CEOs are less likely to be subjected to labor-related litigations. The authors document that firms with overconfident CEOs have fewer lawsuits opened by both labor unions and individuals. The authors then investigate the effect of employee litigations on firm performance to understand why overconfident CEOs are less prominent among lawsuits. The authors show that litigations lower corporate investment and value of capital expenditures for responsible firms, which may limit overconfident CEOs’ ability to invest. Therefore, the results may reveal the fact that overconfident CEOs may prefer to align with the interest of their employees to avoid reduced investment opportunities.
Originality/value
The paper makes three main contributions. First, it provides the first large-sample evidence on CEO overconfidence and labor relations. The authors employ data on firm-level labor litigation that contains both the case reason and case outcome. Second, this paper adds to the growing literature of CEO overconfidence and governance practices in the workplace. Finally, the study highlights the importance of employee treatment and explores the impact of labor lawsuits on firm value.
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In 1971, the patent for the Automated Teller Machine was awarded to David Wetzel. While possibly not the first application of financial technology, since 1971 time, the innovation…
Abstract
In 1971, the patent for the Automated Teller Machine was awarded to David Wetzel. While possibly not the first application of financial technology, since 1971 time, the innovation in the financial industry has grown beyond expectations. However, most studies in innovation ignore the financial sector altogether. In this study, the authors investigate financial technology firms and innovation. After identifying firms that are considered financial technology, the authors collect innovation outcomes such as patents and data breaches associated with those firms. The authors show that patent activity has enjoyed modest growth year over year; however, firms still have challenges to overcome such as market risk and data security. This study serves as a perspective on financial technology.
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Omer Unsal and Bora Ozkan
This chapter examines the patterns influencing the trajectory of fintech enterprises. With the looming challenge of climate change, the financial realm's responsibility in…
Abstract
This chapter examines the patterns influencing the trajectory of fintech enterprises. With the looming challenge of climate change, the financial realm's responsibility in mitigating climate risks has surged into focus. This chapter investigates fintech enterprises' response to climate-related corporate social responsibility in six main domains: (1) climate risk assessment tools, (2) green bonds and sustainable investment tools, (3) ESG integration, (4) carbon trading and carbon credits, (5) sustainable banking, and (6) DeFi and climate initiatives. It also investigates how fintech firms recognize the impact of climate change within their official declarations and efforts to amplify consciousness about climate-related concerns. This chapter assesses climate-linked terminology and expressions using quantitative and qualitative approaches, illuminating these firms' dedication to assimilating climate risk within their operational blueprints.