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Workplace environment and payout policy

Omer Unsal and Jennifer Brodmann

Journal of Economics and Business, 2019, vol. 106, issue C

Abstract: Firms that encounter lawsuits are subject to unforeseen costs when a case is ruled in favor of the plaintiff. We examine the impact of lawsuits brought against firms and whether this affects the firms’ dividend policy, using unique hand-collected datasets of employee litigations and disputes that include court settlements for employee dispute cases in the United States. We find that lawsuits lower a firm’s payout ratio, and an increase in lawsuits for a firm lowers the likelihood of the firm to pay out dividends. The payout ratio also declines for firms following a litigation year: this effect of a lower payout ratio is more pronounced for smaller firms. These findings provide evidence that firms adjust their dividend policy when facing employee lawsuits.

Keywords: Lawsuit; Employee treatment; Dividend policy (search for similar items in EconPapers)
JEL-codes: K1 K31 M51 G35 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jeconbus.2019.04.004

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