Employee treatment, financial leverage, and bankruptcy risk: Evidence from high contact services

Using employee online reviews as a proxy of employee treatment and well-being for tourism and hospitality firms, we extrapolate the association of employee satisfaction with financial leverage and bankruptcy risk. Consistent with theoretical expectations and empirical evidence, we find that firms ranked high on employee treatment have lower levels of market and book leverage. This relationship is also pronounced for bankruptcy risk where firms with higher employee satisfaction enjoy higher creditworthiness. The results are robust controlling for well-known effects, alternative specifications, and endogeneity concerns.