Quotation Mahlstedt, Robert, Weber, Rüdiger. 2020. Risk Sharing Within and Outside the Firm: The Disparate Effects of Employment Protection on Expected Stock Returns.


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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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Risk Sharing Within and Outside the Firm: The Disparate Effects of Employment Protection on Expected Stock Returns
Year 2020
JEL G12, J38, G38

Associations

People
Weber, Rüdiger (Details)
External
Mahlstedt, Robert (University of Copenhagen, Denmark)
Organization
Institute for Finance, Banking and Insurance IN (Details)
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