This article examines the influence of CEO internal political beliefs on labor relations. Prior research has paid little attention to channels through which the internal personal values of managers enhance or deteriorate firm value. We show that CEOs adopt labor policies impacting incumbent management-labor relationships based upon their political ideologies. Our findings indicate that firms led by Republican-leaning CEOs are more likely to be sued by their employees, especially for violating union rights. Moreover, our findings reveal that Republican-leaning CEOs have fewer cases dismissed or withdrawn compared to Democrat-leaning CEOs and are also less likely to settle court cases prior to trial. Lastly, unlike the finding of Hutton et al. (2015) our results show that Republican-leaning CEOs are associated with more substantial decreases in firm value compared to Democrat-leaning CEOs when facing labor allegations. Overall, our results demonstrate that managerial political orientation has a significant impact on firm value arising from employment litigation, building on upper echelons theory.
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