Labor Laws and Firm Performance

U.S. labor laws impose higher costs on unionized firms in states without right-to-work (RTW) laws. I find that these firms experience poor stock performance. The difference-in-differences analysis comparing the effect of RTW laws on unionized and nonunionized firms shows that unionized firms in states without RTW laws underperform by about seven percentage points per year. I find further evidence of underperformance using alternative methodologies to estimate abnormal stock performance, examining a natural experiment, showing expected cross-sectional patterns, as well as examining profitability and the market reaction to earnings announcements