Employment Protection, Investment, and Firm Growth

• 成果类型: Article
• 署名作者: Bai, John (Jianqiu); Fairhurst, Douglas; Serfling, Matthew
• 署名单位: Northeastern University; Washington State University; University of Tennessee System; University of Tennessee Knoxville
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz066
• 发表日期: 2020
• 页码: 644
• 关键词: WRONGFUL-DISCHARGE LAWS; financial constraints; corporate-investment; market imperfections; capital structure; firing costs; irreversibility; reallocation; legislation; debt

摘要

We exploit the adoption of U.S. state-level labor protection laws to study the effect of employment protection on corporate investment rates and sales growth. We find that, following the adoption of these laws, capital expenditures as a percentage of book assets decrease, resulting in slower sales growth. Our findings are consistent with theories predicting that greater employment protection discourages investment by making projects more irreversible. Supporting this channel, following negative cash flow shocks, firms are less likely to downsize operations in states that have adopted these laws but more likely to downsize in states that have not adopted these laws.