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Do Wrongful-Discharge Laws Impair Firm Performance?

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  • Robert C. Bird
  • John D. Knopf
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    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..

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

    Volume (Year): 52 (2009)
    Issue (Month): 2 (05)
    Pages: 197-222

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    Handle: RePEc:ucp:jlawec:v:52:y:2009:i:2:p:197-222

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    Web page: http://www.journals.uchicago.edu/JLE/

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    Cited by:
    1. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2013. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Development Working Papers 354, Centro Studi Luca d\'Agliano, University of Milano.
    2. Viral V. Acharya & Ramin P. Baghai & Krishnamurthy V. Subramanian, 2012. "Wrongful Discharge Laws and Innovation," NBER Working Papers 18516, National Bureau of Economic Research, Inc.
    3. Marco Leonardi & Giovanni Pica, 2012. "Who pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," Working Papers 436, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

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