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Employment Protection and Bank Dividends: Evidence From Wrongful Discharge Laws

Year: 2026

Type: article

Abstract: ABSTRACT Using the staggered adoption of the good faith exception to U.S. wrongful discharge laws, we examine the causal effect of employment protection and firing costs on bank dividend payouts. We find stronger employment protection significantly reduces dividends, with good faith adoption lowering payouts by 7% relative to the mean. In line with the operational leverage hypothesis, cross‐sectional tests show this effect is concentrated among banks with higher labour costs and greater financial leverage. Overall, our results document how employment conditions influence bank dividend payouts and shape the allocation of corporate value among shareholders and employees.

Source: European Financial Management

DOI: 10.1111/eufm.70083

Authors: Alessio Bongiovanni, Joshua Cave

Institution: University of Leeds

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Decent work and economic growth, Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,350