Financially Stressed Employees

Abstract

I use variation in US consumer bankruptcy laws to study the impact of employees' financial well-being on corporate performance. I find that better employees' financial well-being leads to higher firm profitability and labor productivity. The cross-sectional analysis finds more pronounced effects for more human capital intensive firms and those with fewer routine tasks. These results indicate that workers' financial hardship impairs workplace performance, especially in sectors where cognitive skills directly affect productivity. Overall, my findings suggest that policies promoting individuals' financial well-being have positive spillover effects on corporate performance.