Discrimination announcements, employee opinion, and capital structure: Evidence from the EEOC

This paper investigates the impact of discrimination publicity on employee opinion. The findings suggest that employees reduce their sentiments toward the firm and its leaders when discrimination becomes public via Equal Employment Opportunity Commission (EEOC) announcements. Following the stakeholder theory of capital structure, the effect clusters in firms with above‐average leverage. Additionally, discrimination announcements increase accruals and the E index, reinforcing a culture of negative management at the firm. These results suggest that human capital risk plays a vital role in employee reactions to discrimination announcements.