Me Too: Does Workplace Sexual Harassment Hurt Firm Value?
61 Pages Posted: 17 Aug 2019
Date Written: August 14, 2019
We investigate the impact of workplace sexual harassment on firm value. We estimate the incidence of sexual harassment in U.S. firms through textual analysis of employees’ online job reviews, and find that a high sexual harassment score leads to lower future stock returns. During 2011-2017, the value-weighted portfolio of firms in the top quantiles (top 1% to 5%) of the SH score earned a five-factor annualized alpha ranging from -8.7% to -23.6%, or an annual shareholder value loss of $1.0 billion to $2.4 billion per harassment-prone firm. We also find evidence that high sexual harassment scores are associated with sharp declines in operating profitability and increases in labor costs. These results indicate that sexual harassment has a strong damaging impact on firm value, but investors are not fully aware of the costs of sexual harassment.
Keywords: sexual harassment, firm value, stock returns, operating profitability, textual analysis
JEL Classification: J16, G34, G14
Suggested Citation: Suggested Citation