By RON LIEBER MARCH 20, And now, coming to a theater and, inevitably, a courtroom near you, is a sequel, surely not the last, this time featuring RadioShack.

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The company filed for bankruptcy protection last month, after years of lackluster interest from customers who once flocked to the stores for their doodads and gizmos.

In September, when the stock was still worth a small handful of quarters, the company stopped allowing employees to invest in it through their retirement plan, but employees filed suit , claiming that the company should have shielded them from the damage sooner.

The Department of Labor has begun its own inquiry as well. So the lawyers and the bankers are now the protagonists, as they have been in all of these movies. But an obvious question lingers: Why do so many companies and employees keep signing up to be a part of all this drama?

Most let employees swap it for something else right away, but inertia often keeps them from doing so.

The Plan Sponsor Council of America, using a different data set, lays out the results of such policies: When employees have the option or are required because of a match to invest in company stock through a k plan, a fair number do. On average, about At least the number of companies where more than half of the k plan assets are in company stock has fallen over time; in it was 13 percent, but in it was just 2.

Why do companies allow and encourage such investments? There were once plenty of good theories. If employees owned a lot of stock, they might vote their shares with management if hostile forces were trying to take the company over.

And encouraging employees to have skin in the game is good, as it gives them incentive to work hard and rewards them for greater effort. The data related to these theories can be counterintuitive, though.

In , David Blanchett, the head of retirement research for Morningstar Investment Management, found that companies with higher allocations of employer stock in their k plans tend to underperform their peers in the year after that overweighting exists.

Employees increase their allocation to the stock after the stock performs well, just in time for it to reverse course. There are many negatives to allowing employees to invest in their own company in their retirement plans. There, workers use discretionary money of their own if they so choose, and hey, if you want to turn your office into a trading floor, so be it.

Otherwise, why would it be on the k menu? All of this, however, is incredibly risky.

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Employees do this anyway, however, and they do not seem to get themselves out of the investments even when the warning signs are already all around them. A paper by the academics Ying Duan, Edith S. Hotchkiss and Yawen Jiao studied troubled publicly traded companies over 20 years and found that the amounts of money that employees had in company stock remained relatively stable during periods of trouble, as did their new contributions.

This is true even as the stock prices decline and the number of investors betting against the stock in the public markets through short sales increases. The lawsuit will determine whether the company should have stopped its employees from making what turns out to have been a foolish bet.

The message of this and other movies like it is clear for employees: If your employer matches your k contribution in company stock, set a calendar alert to remind yourself to sell it a few times each year and then reinvest it.

Even if an employer stock fund is one choice among many in your k plan, ask yourself this: Given the employment risk you already face by getting your income from a single source, do you really want to bet even part of your retirement money on that company? How much do you really know about its prospects, its competitors and forces way beyond your control?

And how much are you willfully blind to? Might the stock price take a hit once word gets out? The chief executive could even buy a bunch more stock in the open market that very day. The bottom line is this, or it should be at least: A version of this article appears in print on March 21, , on Page B1 of the New York edition with the headline: The Scariest Stock to Put in the k.

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A Scary Movie: Filling Your (k) With Company Stock - The New York Times

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