Sexual Harassment Foreshadows Weak Stock Performance: Study

How much does a high incidence of sexual harassment within a company hurt firm value?

The news last week that McDonald’s is suing its former CEO Steve Easterbrook to recover severance pay he received when fired last fall is the latest reminder, if any is needed, of the pain companies undergo when top executives are exposed for alleged sexual misbehavior.

Announcement of the firing in November triggered a volume of trading in the company’s stock that was more than four times its average daily level as well as a share-price drop of about 2.7% on a day the three major stock indices all rose.

But if company woes from public exposure of C-suite sexual misconduct have become a familiar story, what about the more common variety that gains little, if any, media or regulatory attention — sexual harassment across the length and breadth of company ranks? As a new study asks, how much does a high incidence of sexual harassment hurt firm value?

Plenty, concludes the research presented last week at the annual meeting of the American Accounting Association.

Source: CFO

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