LABOR LAWS AND FIRM PERFORMANCE
Journal of Financial Research, 2018, vol. 41, issue 1, 5-32
U.S. labor laws impose higher costs on unionized firms in states without rightâ€ toâ€ work (RTW) laws. I find that these firms experience poor stock performance. The differenceâ€ inâ€ differences analysis comparing the effect of RTW laws on unionized and nonunionized firms shows that unionized firms in states without RTW laws underperform by about 7 percentage points per year. I find further evidence of underperformance using alternative methods to estimate abnormal stock performance, examining a natural experiment, showing expected crossâ€ sectional patterns, and assessing profitability and the market reaction to earnings announcements.
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