Firm benefits of workers' financial well-being

We investigate the impact of workers' financial well-being on their productivity, firm performance, and strategic accounting decisions. We examine changes in workers’ financial well-being by exploiting variations in consumer bankruptcy laws across U.S. states. We find that improved financial well-being among the workforce leads to reduced illness and injury-related absenteeism, enhanced labor productivity, and increased firm profitability. Consequently, firms exhibit a decline in real activities management, financial misstatements, and loss avoidance practices. Overall, our evidence suggests that enhancing workers' financial well-being not only boosts firm productivity and performance but also mitigates the likelihood of firms engaging in myopic decision-making.