Workplace environment and payout policy
Omer Unsal and
Journal of Economics and Business, 2019, vol. 106, issue C
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)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:106:y:2019:i:c:s014861951830198x
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