Do right-to-work laws reduce financial constraints of firms? Evidence from Michigan and Indiana companies

ABSTRACT

This study examines financial constraints of Michigan and Indiana firms before and after the two states enacted Right-to-Work laws in 2012 relative to those in states with and without RTW laws as separate control groups. Findings based on difference-in-difference regressions indicate that, on average, financial constraints of Michigan and Indiana firms were significantly higher than those in both the control groups before the RTW laws were enacted, but the constraints declined significantly after the laws were enacted not only relative to the pre-enactment levels but also relative to those of companies in both the control groups.

KEYWORDS:

• Right-to-work
• PRO Act
• difference-in-difference
• financial constraints

JEL CLASSIFICATION:

• G28
• G32
• J48
• J58

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the Office of Undergraduate Research, Grand Valley State University [$6,000].