How Much Does Workplace Sexual Harassment Hurt Firm Value?

Shiu-Yik Au (), Ming Dong () and Andréanne Tremblay ()
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Shiu-Yik Au: University of Manitoba
Ming Dong: York University
Andréanne Tremblay: Université Laval

Journal of Business Ethics, 2024, vol. 190, issue 4, No 7, 883 pages

Abstract: Abstract It is widely recognized that workplace sexual harassment has significant negative psychological and personal consequences, and employees facing harassment suffer reductions in productivity. Our contribution is to propose a novel measure of workplace sexual harassment risk and provide a fuller estimation of the firm value impact of sexual harassment. In contrast to recent studies that focus on short-run market reactions to media announcements of harassment scandals, we use employee job reviews to identify low-profile harassment incidents that better reflect the pervasive, toxic environment pertaining to sexual harassment than do newsworthy scandals, and 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 − 17% in the 1-year period after high-SH classification, and this damage is concentrated in firms with higher investor attention. Furthermore, high-SH firms experience a decline in operating profitability and an increase in labor costs during a 5-year period around high-SH classification. Our evidence suggests that sexual harassment can cause greater damages to firm value than previously documented.

Keywords: Sexual harassment; Employee reviews; Firm value; Stock returns; Enviornmental; Social; and Governance (ESG) (search for similar items in EconPapers)
JEL-codes: G14 G34 J16 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10551-023-05335-x

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