The 2020 anti-power harassment law – boon or bane? Investigating its impact on Japanese listed firms

Purpose Recently, cases of abuse of authority and bullying in the workplace, known as “power harassment,” have been rising in Japan. In response to power harassment, the Japanese government enacted an anti-power harassment law in 2020, mandating firms to take measures to prevent and address this issue in the workplace. Considering the uniqueness and criticality of the anti-power harassment law, this study aims to investigate its effects on Japanese listed firms, focusing on employee well-being and firm performance. Design/methodology/approach Using panel data on approximately 2,400 firm-year observations for listed Japanese firms (2018–2021), this study combines financial, governance and employee-related data with adjustments for outliers. A difference-in-differences model with firm and year fixed effects is used to estimate the impact of the 2020 anti-power harassment law. Findings In addition to decreasing the paid leave take-up rate, the law increases firms’ market value. Moreover, employees voluntarily prioritize task involvement over downtime caused by heightened work engagement resulting from an improved workplace environment. Practical implications This study supports the mutual gains theory and focuses on a unique Japanese regulation, offering practical insights for foreign regulators and policymaking institutions. Originality/value This study focuses on a unique Japanese regulation and contributes to the literature by providing new evidence on the well-being debate.