Employee Lawsuits and Capital Structure

Review of Managerial Science, Forthcoming

Posted: 31 May 2019

See all articles by Omer Unsal

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Date Written: September 22, 2018

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.

Keywords: Capital structure, Labor disputes, Employment protection, Employee lawsuit, Financial distress costs

JEL Classification: G31, G32, G33, J63, K31

Suggested Citation

Unsal, Omer and Hassan, M. Kabir, Employee Lawsuits and Capital Structure (September 22, 2018). Review of Managerial Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3384793

Omer Unsal (Contact Author)

Merrimack College - Girard School of Business - Department of Accounting and Finance ( email )

315 Turnpike St
North Andover, MA 01845
United States

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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