Essays in corporate finance, corporate culture, and labor market

Abstract

This thesis consists of three essays on employee satisfaction and its influences on corporate leverage, corporate cash holdings, and the cost of debt. The first chapter examines the relationship between employees' satisfaction with their company and corporate leverage. Using Glassdoor ratings, we find that firms with higher employee satisfaction with their companies hold less debt. This is robust to the situation where employee satisfaction measures have become more accurate with the introduction of Anti-SLAPP (Strategic Lawsuit Against Public Participation) legislation. An analysis using the introduction of the Right-to-Work (RTW) law confirms that the influence of employee satisfaction in lowering a company's leverage is due to the company's strategic leverage decision being conscious of workers' bargaining power. The second chapter, using the Glassdoor survey database, suggests that companies with higher employee satisfaction have greater cash holdings. These results were even more noticeable when Anti-SLAPP was passed, and by comparing before and after the passage of the Inevitable Disclosure Doctrine (IDD), we confirm that the positive influence of employee satisfaction on a company's cash holdings is through the channel of the importance of labor within the company. This relationship, however, only exists in firms that do not have environmental or social concerns, and companies that do have environmental or social concerns do not strategically choose the level of cash holdings. The third chapter shows that companies with higher employee satisfaction with their companies have less cost of debt using Glassdoor ratings. Through a comparative analysis of whether or not the IDD was introduced, it is shown that concerns about human resource risk act as a channel in the decision to lower a company's debt cost depending on employee satisfaction. Employee satisfaction is influential as another factor that reduces the company's cost of debt separately from ESG involvement.