Wrongful discharge laws and asymmetric cost behavior
Yongtae Kim, Associate Dean and Siqi Li, Department Chair
Kim, Yongtae & Li, Siqi & Park, Hyungshin. (2020). Wrongful Discharge Laws and Asymmetric Cost Behavior. Journal of Law, Finance, and Accounting. 5. 65-105. 10.1561/108.00000041.
Abstract
Exploiting the natural experiment created by the adoption of wrongful discharge laws (WDLs) across U.S. states, we examine the e铿ect of legal protection against unjust employment termination on 铿乺m-level cost behavior. We 铿乶d that the adoption of WDLs increases the asymmetric sensitivity of costs to activity (i.e., coststickiness). The e铿ect of WDLs on cost stickiness varies across 铿乺msand industries, as well as by adoption timing and multiplicity. Our evidence suggests that changes in the state-level legal environment have a signi铿乧ant e铿ect on 铿乺m-level resource adjustment decisions and asymmetric cost behavior.