Do Wrongful-Discharge Laws Impair Firm Performance?

Robert C. Bird and John D. Knopf

Journal of Law & Economics, 2009, vol. 52, issue 2, pages 197-222

Abstract: We estimate the effects on firm costs and profitability of wrongful-discharge protections adopted by U.S. state courts during 1977-99. By examining the data of approximately 18,000 commercial banks, after controlling for local state economic conditions, we find evidence of a relationship between the adoption of the implied contract exception and the increase in labor expenses. In addition, adoption of the implied contract exception is found to have a significant and negative effect on overall profitability. The study corroborates previous findings that wrongful-discharge laws place increased costs on employers. (c) 2009 by The University of Chicago. All rights reserved..

Date: 2009

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