Premium
LABOR LAWS AND FIRM PERFORMANCE
Author(s) -
Marciukaityte Dalia
Publication year - 2018
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12137
Subject(s) - earnings , profitability index , stock (firearms) , work (physics) , right to work , natural experiment , economics , labour economics , business , law , accounting , finance , medicine , political science , mechanical engineering , pathology , engineering
U.S. labor laws impose higher costs on unionized firms in states without right‐to‐work (RTW) laws. I find that these firms experience poor stock performance. The difference‐in‐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 cross‐sectional patterns, and assessing profitability and the market reaction to earnings announcements.