How do investors react to problematic social issues in organisations? Evidence from the literature on workplace sexual harassment

This chapter assesses how investors react to public disclosures of problematic social issues in organisations by reviewing the literature on workplace sexual harassment. Based on a systematic review of nine event studies examining stock price reactions to public disclosures of workplace sexual harassment, we find unanimous support for abnormal stock losses to firms that employ the individual(s) accused of sexual harassment due to profitability and reputation losses. Furthermore, authors detected stronger stock losses in case an executive is implicated, while corporate culture might be a moderating factor. The authors also dealt with the spillover effect of sexual harassment on organisations not directly implicated in an accusation and detected abnormal stock losses to organisations with female-unfriendly organisational culture and abnormal stock gains for female-friendly organisations. These findings come with important implications for organisational social responsibility engagement and wider social sustainability. We use these findings to point at implications for future research regarding current research gaps and methodological limitations.