Seasoned Equity Offerings and Firm Workplace Safety

We investigate the changes in employee workplace safety around Seasoned Equity Offerings (SEOs). Equity issuing firms have competing incentives: They may cut investments in workplace safety to inflate firm profits in order to increase SEO proceeds, or they may increase investments in workplace safety to appeal to current and prospective shareholders, especially those that value firms’ corporate social responsibility commitments. The equilibrium that firms achieve has far-reaching implications not only for their own long-term viability, but also for stakeholders, including regulators, investors, and society as a whole. By using data on U.S. workplace health and safety violations to proxy for workplace safety, we show that the frequency of such violations increases in proximity to SEOs. We further examine the ripple effects of workplace safety violations on employees’ perception of their employer, and on subsequent firm financial and stock market performance. Our results suggest that in the two years following an SEO, there is a noticeable shift towards negative sentiment among employees. Additionally, firms with workplace safety violations tend to experience a stronger deterioration in their financial and stock market performance. Overall, firms appear to compromise employee workplace safety to enhance their financial performance and maximize SEO proceeds, yet they inadvertently undermine post-SEO productivity and performance in the process.