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Do Wrongful-Discharge Laws Impair Firm Performance?

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  • Robert C. Bird
  • John D. Knopf

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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  • Robert C. Bird & John D. Knopf, 2009. "Do Wrongful-Discharge Laws Impair Firm Performance?," Journal of Law and Economics, University of Chicago Press, vol. 52(2), pages 197-222, May.
    • Handle: RePEc:ucp:jlawec:v:52:y:2009:i:2:p:197-222
    DOI: 10.1086/596560
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