Employee relations and stock price crash risk: Evidence from employee lawsuits |
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| Affiliation: | 1. College of Management and Economics, Tianjin University, Tianjin 300072, China;2. China Center for Social Computing and Analytics, Tianjin 300072, China;1. School of Economics, Jinan University, Guangzhou 510632, China;2. School of Economics and Finance, South China University of Technology, Guangzhou 510006, China;1. Central University of Finance and Economics, No. 39 in Southern College Road, Haidian District, Beijing, China;2. Shandong University of Finance & Economics, No. 40 in Shungeng Road, Jinan, China;1. Bond Business School, Bond University, Australia;2. School of Public Finance and Taxation, Central University of Finance and Economics, China;1. College of Business Administration, Cheongju University, Cheongju-si, Chungcheongbuk-do, Republic of Korea;2. College of Business & Public Management, Wenzhou-Kean University, Wenzhou, Zhejiang, China |
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| Abstract: | In this paper, we examine the effect of firms' employee relations, measured by the number of employee lawsuits divided by the total number of employees, on stock price crash risk. Firms with higher employee lawsuit ratios tend to have higher stock price crash risk. Our results are robust after addressing possible endogeneity and using alternative measures of employee relations and stock price crash risk. We also find that the association between the employee lawsuit ratio and stock price crash risk is less prominent for state-owned enterprises, for firms with stringent external monitoring, and for firms with positive earnings news. Finally, earnings aggressiveness appears to be the channel through which the employee lawsuit ratio affects stock price crash risk. Collectively, our study is in line with the stakeholder theory, and highlights the importance of employee lawsuit for preventing crash of stock price. |
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