Date of Award

2022-05-01

Degree Name

Doctor of Philosophy

Department

Business Administration

Advisor(s)

Erik Devos

Abstract

This dissertation examines the valuation effects of a legislative shock to employee litigation rights, as well as the mediating effects of pre-existing employee rights.The first chapter examines the valuation effects of the Passage of the Lilly Ledbetter Fair Pay Act, an act that increases employee litigation rights related to demographic-based discriminatory compensation filings. We find that firms with relatively fewer women in their workforce exhibit a significant negative three-day abnormal return of 0.61% around the passage of the Lilly Act. In contrast, we find that firms with relatively more women in their workforce do not exhibit a significant abnormal return. Additionally, firms with lower female representation exhibit larger increases in their implied cost of capital and larger decreases in their expected cash flow compared to firms with high female representation. We do not find differences in market reactions or analyst forecasts based on differences in racial diversity in the workforce. We interpret our results as a response to perceived increases in litigation risk. The second chapter further explores whether pre-existing employee rights, proxied by union power, moderate or exacerbate the valuation effects of the passage of the Lilly Act. We find that firms with relatively more union power exhibit a significant negative three-day abnormal return of 1.12% around the passage of the Lilly Act. Firms with relatively lower union power on the other hand do not exhibit a significant abnormal return. Further analysis shows that although union power does not affect changes in the implied cost of capital or expected cash flows, firms located in non-right-to-work states, states with more employee rights, exhibit significantly larger increases in their implied cost of capital. We interpret our results as evidence that markets associate stronger pre-existing employee rights with larger increases in perceived litigation risk around the passage of the Lilly Act.

Language

en

Provenance

Received from ProQuest

File Size

68 p.

File Format

application/pdf

Rights Holder

Adrian Tippit

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