Firms differ in their dependence on skilled labor, and face labor adjustment costs that increase with their workers’ skill level. We show that firms with a higher share of skilled workers, and thus less flexibility to adjust their labor demand in response to cash flow shocks, hold more precautionary cash. The effect of labor skills on cash holdings is more pronounced for financially constrained firms and varies with exogenous differences in firing and hiring costs. We address endogeneity concerns by using subsamples of firms with reasonably similar characteristics, propensity score matching, and a quasi-experimental shock to labor markets.
|Journal||Review of Financial Studies|
|Early online date||19 May 2017|
|Publication status||Published - Oct 2017|
- Cash Holdings, Skilled Labor, Labor Adjustment Costs, Labor Heterogeneity
FingerprintDive into the research topics of 'Cash Holdings and Labor Heterogeneity: The Role of Skilled Labor'. Together they form a unique fingerprint.
Role of skilled labour in financial decisions
1 Media contribution
Press/Media: Expert comment