QUEEN’S BUSINESS SCHOOL FINANCE SEMINAR SERIES

Wednesday 18^th February

1pm

“Employee Electronic Privacy and Stock Price Crash Risk”

Wei song

University of Nottingham

Abstract

We present evidence that employee electronic privacy is an important determinant of corporate crash risk. Our tests exploit the staggered adoption of U.S. state employee electronic privacy (EEP) laws, which prohibit employers from requesting or accessing employees’ login credentials for personal online accounts and electronic devices. We find a significant decline in stock price crash risk for firms headquartered in states that adopt EEP laws relative to firms in non-adopting states. The effect is stronger for firms with a more opaque information environment. We show that EEP laws increase both the volume and informativeness of employees’ negative firm-specific disclosures on Glassdoor and are associated with greater voluntary managerial disclosure. Overall, our results indicate that protecting employee electronic privacy enhances corporate transparency and mitigates crash risk.

QBS Student Hub, Entrepreneurial Hub, 01.028