Labor lawsuits and debt maturity
ISSN: 1472-0701
Article publication date: 27 September 2021
Issue publication date: 21 February 2022
Abstract
Purpose
This paper aims to investigate how firms’ relationships with employees define their debt maturity. The authors empirically test the role of employee litigations in influencing firms’ choice of short-term versus long-term debt. The authors study employee relations by analyzing the importance of the workplace environment on capital structure.
Design/methodology/approach
The author’s test hypotheses using a sample of US publicly traded firms between 2000 and 2017, including 3,056 unique firms with 4,256 unique chief executive officer, adopting the fixed effect panel model.
Findings
The authors document that employee litigations have a significant negative effect on the use of short-term debt and a significant positive affect on long-term debt. Employee litigations, along with legal fees, outcomes and charging parties, matter the most in explaining debt maturity. In addition, frequently sued firms abandon the short-term debt market and use less shareholders’ equity to finance their operations while relying more on the longer debt market.
Originality/value
To the best of the authors’ knowledge, this is the first study to examine the role of employee mistreatment in debt maturity choice. The study extends the lawsuit and finance literature by examining unique, hand-collected data sets of employee lawsuits, allegations, violations, settlements, charging parties, case outcomes and case durations.
Keywords
Citation
Unsal, O. (2022), "Labor lawsuits and debt maturity", Corporate Governance, Vol. 22 No. 2, pp. 385-404. https://doi.org/10.1108/CG-12-2020-0531
Publisher
:Emerald Publishing Limited
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