We hypothesize that employee flexibility enhances firm value by helping firms respond to exogenous shocks. We estimate employee-flexibility scores through textual analysis of online job reviews, and we find that a high flexibility score leads to superior stock returns for firms exposed to external risk. During 2011–2017, the value-weighted hedge portfolio formed on employee flexibility earned a 5-factor annualized alpha of 9.5% during periods of high policy uncertainty. Earnings-announcement returns also suggest that investors do not fully value workforce flexibility. These results indicate that employee flexibility is a valuable corporate intangible that helps firms to manage risk during uncertain times.

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We study how social connectedness affected active mutual fund manager trading behavior in the first half of 2020. In the first quarter during which the coronavirus disease 2019 (COVID-19) outbreak occurred, fund managers located in or socially connected to COVID-19 hotspots sold more stock holdings compared with a control group of unconnected managers. The economic impact of social connectedness on stock holdings was comparable with that of COVID-19 hotspots and was elevated among “epicenter” stocks most susceptible to the pandemic shock. In the second quarter, social interaction had an overall negative effect on fund performance, but this effect depended on manager skill; unskilled managers who were connected to the hotspots underperformed, whereas skillful managers suffered no deleterious effect. Our evidence suggests that social connections can intensify salience bias for all but the most skilled institutional investors, and policy makers should be wary of the destabilizing role of social networks during market downturns. This paper was accepted by Gustavo Manso, finance. Funding: This work was supported by the Social Science and Humanities Research Council of Canada. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4814 .

Research Question/IssueWe contrast the predictions of gender socialization theory and “fem‐power washing” (deceptively positioning as a firm promoting female empowerment without any tangible actions) to investigate whether promoting female directors on the board of directors associates with a reduction in the prevalence of firm‐level workplace sexual harassment (SH).Research Findings/InsightsWe estimate the incidence rate of SH through textual analysis of US employees' job reviews published online during the period 2011–2021. We find that an increase of one female director is associated with a 21.81% decrease in workplace SH and that firms with high board gender diversity synchronize the reduction in SH with improved social policies (e.g., policies to better employee relations, health and safety, or diversity challenges). Our results do not support the fem‐power washing theory but rather imply that nominating female directors may have a profound impact on the firm's ethical culture.Theoretical/Academic ImplicationsThis study validates the ethical dimension of corporate governance: Nominating female directors impacts a firm harassment culture and, by extension, a firm's ethical and corporate culture. This study adds to the governance literature that debates the merits of board gender diversity by highlighting an oft‐ignored channel through which board diversity affects firm value: ethics and corporate culture.Practitioner/Policy ImplicationsFor boards of directors, having more female directors can curb workplace SH, a behavior that is associated with a severe and lasting negative effect on firm value. For practitioners, regulators, and the business community, this study reinforces the merits of aiming towards more gender‐balanced boards.