Managers' sexually-oriented behavior and firm performance: linking media reports to stock market reactions and legal risk


Purpose: The goal of this study is to examine the association between managers' sexually-oriented behavior in publicly traded firms and subsequent stock market reactions. Both sexual harassment and nonharassing sexually-oriented behavior (i.e. workplace romance) are associated with negative shareholder reactions. The authors also examine factors that may alter the stock market reaction and those that may reduce the risk of lawsuit in sexual harassment cases. Design/methodology/approach: Information about incidents of sexually-oriented behavior was collected from media reports and content coded. An event study with a stock market reaction was used to measure the impact of disclosed sexually-oriented behaviors. Logistic regression was used to assess the relationship between incident characteristics and sexual harassment lawsuits. Findings: Disclosure of managers' sexually-oriented behavior is associated with a negative stock market reaction. Interestingly, the reaction was not more severe for sexual harassment disclosures compared to nonharassing behavior (i.e. workplace romance). Results also suggest that terminating a manager prior to disclosure of an event is negatively related to a harassment lawsuit. Originality/value: The authors report this as the first study to focus on the stock market reaction of sexually-oriented harassing and nonharassing behavior of managers. This work complements research that documents the negative impact of sexual harassment on individuals by demonstrating these behaviors are associated with loss and risk at an organizational level.

Publication Title

Journal of Strategy and Management