Employee relations and stock price crash risk: Evidence from employee lawsuits

Junqing Zuo, Wei Zhang, Mingya Hu, Xu Feng and Gaofeng Zou

International Review of Financial Analysis, 2022, vol. 82, issue C

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.

Keywords: Employee lawsuits; Stock price crash risk; China (search for similar items in EconPapers)
JEL-codes: G12 G14 J52 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001491

DOI: 10.1016/j.irfa.2022.102188

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