Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232693 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13941
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We study the effect of wrongful-discharge laws (WDL) on firm-level stock returns. We find disparate effects depending on the exact design of the law. Consistent with rational, risk-based pricing, the effect on returns seems to be linked to how firms share systematic risk with their employees under the respective laws. Firms in states with WDLs prohibiting employers from acting in bad faith have more intra-firm risk sharing and lower expected returns. Vaguer legislation that prohibits discharges in retaliation for acting in accordance with public policy is associated with less intra-firm risk sharing and higher expected returns.
Subjects: 
labor protection
expected stock returns
risk sharing
JEL: 
G12
J38
G38
Document Type: 
Working Paper

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