Silencing Salary Talk: How Salary History Bans Affect Corporate Investment and Performance

We examine how salary history bans (SHBs), which restrict employers’ access to applicants’ prior pay, affect corporate investment and performance. By eliminating salary history as a signal of worker productivity and reservation wages, SHBs increase labor-related uncertainty and expected hiring costs, discouraging long-term investment. At the same time, firms adjust by adopting more disciplined hiring and capital allocation practices that improve match quality and reduce overinvestment. Exploiting the staggered adoption of SHBs by U.S. states in a difference-in-differences design, we find that while capital and R&D investment decline after SHBs are adopted, investment efficiency, productivity, profitability, and firm value increase.