How Much Does Workplace Sexual Harassment Hurt Firm Value?

54 Pages Posted: 17 Aug 2019 Last revised: 25 Jan 2022

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: January 25, 2022

Abstract

It is widely recognized that workplace sexual harassment has significant negative psychological and personal consequences, and employees facing high harassment risk experience productivity losses. We investigate to what extent sexual harassment hurts firm value. In contrast to recent studies that focus on short-run market reactions to announcements of harassment scandals, we measure the longer-term effect on firm value starting from the date when harassment risk affects employee morale. We identify firm harassment risk by analyzing employee job reviews and estimate the sexual harassment score (SH) through textual analysis of online job reviews. Our sample of high-SH firms, or firms with unusually high SH scores, exhibits significant reductions in future stock performance and profitability. For example, firms with a top 2% SH score earn a value-weighted risk-adjusted stock return of –13% in the one-year period after high-SH classification. Furthermore, these firms experience a decline in operating profitability and an increase in labor costs during a five-year period around high-SH classification. Our evidence suggests that sexual harassment can cause greater damages to firm value than previously documented.

Keywords: disclosure, sexual harassment, 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, How Much Does Workplace Sexual Harassment Hurt Firm Value? (January 25, 2022). 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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