Employee Sexual Harassment Reviews and Firm Value

68 Pages Posted: 17 Aug 2019 Last revised: 2 Aug 2021

See all articles by Shiu-Yik Au

Shiu-Yik Au

University of Manitoba - Asper School of Business

Ming Dong

York University - Schulich School of Business

Andreanne Tremblay

Université Laval - Département de Finance et Assurance

Date Written: July 30, 2021

Abstract

Firms with workplace sexual harassment risk are reluctant to disclose such information. However, rank-and-file employees may reveal harassment information via anonymous job reviews. We investigate whether a measure of sexual harassment (SH score) constructed by performing textual analysis of online job reviews contains value-relevant information that affects firm performance. We find that SH reveals significant future problems for firms in terms of profitability, labor costs, and stock performance. In our sample firms during 2011-2017, high SH scores are associated with sharp declines in operating profitability and increases in labor costs. Firms in the top quantiles (top 1% to 5%) of the SH score earned lower risk-adjusted stock returns, representing an annual shareholder value loss of $0.8 to $1.4 billion per harassment-prone firm. These results indicate that sexual harassment has a highly detrimental effect on firm value, and employee voluntary reporting can be a valid disclosure mechanism when firms are disincentivized to reveal bad news. This research highlights the value-relevance of information held by rank-and-file employees, including information about possible corporate misconduct.

Keywords: sexual harassment, accounting disclosure, employee reviews, firm value, environmental, social, and governance (ESG)

JEL Classification: J16, G34, G14

Suggested Citation

Au, Shiu-Yik and Dong, Ming and Tremblay, Andreanne, Employee Sexual Harassment Reviews and Firm Value (July 30, 2021). Available at SSRN: https://ssrn.com/abstract=3437444 or http://dx.doi.org/10.2139/ssrn.3437444

Shiu-Yik Au (Contact Author)

University of Manitoba - Asper School of Business ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada
(204) 474-9783 (Phone)

Ming Dong

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-2100 ext. 77945 (Phone)
416-736-5687 (Fax)

Andreanne Tremblay

Université Laval - Département de Finance et Assurance ( email )

Pavillon Palasis-Prince
Quebec G1K 7P4
Canada

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