Labor Litigation and Firm Performance

Abstract

We assess the impact of labor litigations on the ex post performance of firms. Using a sample of 44 French labor litigation cases, our empirical results confirm that the compensation amount requested by an employee has a significant and negative influence on the firm financial performance. Although that effect fades over time, it still remains significant four years after the employee has initiated the legal procedure. In addition, firms that have opted for a trial rather than a conciliation procedure improved their financial performance only in the first two years following the triggering of the litigation. That effect can be mainly explained by the long delays in the judgment of French labor courts. Our results contribute to the debate on the labor litigation impacts by assessing the financial opportunity of enacting pro-worker labor legislation dealing with employment redundancies.

Citation

Stef, N. and Tisserand, J.-C. (2021), "Labor Litigation and Firm Performance", Langenfeld, J., Fagan, F. and Clark, S. (Ed.) The Law and Economics of Patent Damages, Antitrust, and Legal Process (Research in Law and Economics, Vol. 29), Emerald Publishing Limited, Leeds, pp. 69-87. https://doi.org/10.1108/S0193-589520210000029005