Firm Reputation Following Financial Misconduct: Evidence from Employee Ratings

53 Pages Posted: 26 Oct 2018 Last revised: 25 Oct 2019

See all articles by Yuqing Zhou

Yuqing Zhou

University of California, Los Angeles (UCLA), Anderson School of Management, Students

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: February 28, 2019

Abstract

Using data from Glassdoor between 2008 and 2016, we study the effect of the public announcement of financial misconduct on employees' perceptions of firms, managers, and their salaries. We find a 0.32 standard deviation decline in overall company ratings following the public announcement of misconduct. The effects are stronger among employees who have weaker bargaining power on the job market, such as non-college workers and shorter tenure workers. Moreover, the salaries of certain employee groups slightly increase during the period of misconduct and decrease for a few years after the misconduct announcement. We also find that employee ratings are helpful for predicting misconduct.

Keywords: Financial Misconduct, Firm Reputation, Employee Ratings

JEL Classification: G3, M4

Suggested Citation

Zhou, Yuqing and Makridis, Christos, Firm Reputation Following Financial Misconduct: Evidence from Employee Ratings (February 28, 2019). Available at SSRN: https://ssrn.com/abstract=3271455 or http://dx.doi.org/10.2139/ssrn.3271455

Yuqing Zhou (Contact Author)

University of California, Los Angeles (UCLA), Anderson School of Management, Students ( email )

Los Angeles, CA
United States

HOME PAGE: http://www.yuqingzhou.com/

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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