Political Attitudes and Equity Market Reactions to Vaccine Mandate Bans

Authors: Michael J. Cooper, Fan Li, Tim Liu, Yihui Pan

Abstract: In 2021, many firms began considering and implementing vaccine mandates as a means to return workers to in-person work. In response, twelve states enacted laws banning employer COVID-19 vaccine mandates. We study equity market reactions to these bans and find a 0.64 percentage point increase in cumulative abnormal returns to affected firms over a three-day window when the bans are signed into law, compared to unaffected firms. The positive market reaction concentrates in firms in Republican-leaning counties, especially if they face a tight local labor market, and in firms with Democratic leadership but Republican workforce. Overall, our findings highlight the importance of workers’ non-monetary preferences on labor-related outcomes and suggest that regulations aligned with workers’ preferences could relieve firms from potential labor adjustment costs.