Paid Leave Pays Off : The Effects of Paid Family Leave on Firm Performance

Bennett, Benjamin and Erel, Isil and Stern, Lea and Wang, Zexi (2025) Paid Leave Pays Off : The Effects of Paid Family Leave on Firm Performance. Review of Finance. ISSN 1572-3097 (In Press)

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Abstract

We study the effects of state-level Paid Family Leave (PFL) laws on U.S. firms across a broad panel of private and public companies. Following PFL adoption, female employee turnover declines, labor productivity increases, and treated firms experience significant improvements in operating performance. These effects are stronger in regions with a larger supply of childbearing-age female labor, among R&D-intensive firms and firms with high intangible capital, consistent with a mechanism in which PFL reduces job separation expectations and encourages investment in firm-specific human capital. Our findings suggest that PFL can generate tangible firm-level benefits by enhancing workforce stability and productivity.