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Corporate governance and employee treatment: evidence from takeover defenses

Author

Listed:
  • Omer Unsal

    (Merrimack College)

  • Blake Rayfield

    (Indiana State University)

Abstract

In this study, we use a unique hand-collected dataset of employee lawsuits to understand the effect of litigation on CEO turnover. We gather 28,258 employee disputes (after initial court hearing) dating between the years 2000 and 2014 to test the relationship between executive turnover following employee allegations. We find increased turnover of CEOs following labor lawsuits. Additional analysis suggests that, following the lawsuits, CEO compensation decreases and becomes more sensitive to cash holding. Our results show that employee lawsuits have an impact on CEO turnover, regardless of the case outcome or motivation. Overall, we document the importance of employee treatment in the workplace. We conclude employee treatment may impact both the tenure and future job prospects of a CEO.

Suggested Citation

  • Omer Unsal & Blake Rayfield, 2020. "Corporate governance and employee treatment: evidence from takeover defenses," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(2), pages 361-391, April.
    • Handle: RePEc:spr:jecfin:v:44:y:2020:i:2:d:10.1007_s12197-019-09478-4
    DOI: 10.1007/s12197-019-09478-4
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    More about this item

    Keywords

    CEO tenure; CEO pay; Labor litigation; Labor law;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K15 - Law and Economics - - Basic Areas of Law - - - Civil Law; Common Law
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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