Paid maternity leave and corporate debt maturity structure

Purpose In this study, we examine how the adoption of Paid Maternity Leave (PML) across U.S. states affects firms’ debt-maturity choices. Using a staggered difference-in-differences approach, we find that firms in PML states rely less on short-term debt financing. This effect appears to be driven by lower performance volatility and increased investment in research and development and brand capital. Design/methodology/approach Our sample comprises all non-financial, non-utility firms at the intersection of CRSP and Compustat between 1998 to 2022. We run a multivariate regression framework with fixed effects using the staggered enactment of Paid Maternity Leave (PML) laws across U.S. states and a difference-in-differences approach. Our main dependent variable, is one-year lead value of short-term debt proxies. The key variable of interest in this study is PML, which are the paid maternity leave laws implemented by several US states over time since 2002. Findings Firms in PML-implemented states reduce their reliance on short-term debt as compared to the firms in non-PML implemented states. This effect operates through improved operational stability, reduced legal exposure, and more efficient working capital management, along with an increased reliance on trade credit. Importantly, we also find that PML laws are associated with greater investment in research and development and brand capital, suggesting that such policies may foster a longer-term, innovation-oriented corporate strategy. Originality/value This manuscript is appropriate for publication because it addresses an unanswered question of how the adoption of PML affects firms' debt maturity choices. Future research on capital structure will highly be benefitted from our study. This manuscript has not been published and is not under consideration for publication elsewhere.