Corporate Responses to Local Social Issues: Evidence from Shocks to the Female Labor Market

Abstract

Do firms proactively respond to local social issues? We explore this question through state-level hospital policies that promote breastfeeding. While these policies have a positive intergenerational impact on infants, they also create challenges for the female workforce, particularly new mothers. Although firms are not required to respond, some actively adapt by creating a more parenting-friendly work environment. These improvements are concentrated in firms with greater female and minority representation on their boards and those with a high female labor dependency. While these voluntary efforts enhance employee satisfaction and reduce employee churn, they do not significantly affect firms’ operating performance, thereby increasing the overall social welfare.

Keywords: Corporate Policy, Child Penalty, Parenting Friendliness, Female Labor Market