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Workplace environment and payout policy

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  • Unsal, Omer
  • Brodmann, Jennifer

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.

Suggested Citation

  • Unsal, Omer & Brodmann, Jennifer, 2019. "Workplace environment and payout policy," Journal of Economics and Business, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:jebusi:v:106:y:2019:i:c:s014861951830198x
    DOI: 10.1016/j.jeconbus.2019.04.004
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    Cited by:

    1. Unsal, Omer & Brodmann, Jennifer, 2020. "The impact of employee relations on the reputation of the board of directors and CEO," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 372-388.

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    More about this item

    Keywords

    Lawsuit; Employee treatment; Dividend policy;
    All these keywords.

    JEL classification:

    • K1 - Law and Economics - - Basic Areas of Law
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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