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Employment stability and corporate cash holdings

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SSCI ABDC-B

Abstract

This paper investigates how a firm's employment stability affects the level of its cash holdings. We find that firms with high employment stability (as measured by one minus a firm's employment elasticity with respect to its sales) maintain large cash holdings. The positive effect of employment stability on cash holdings is stronger for R&D intensive firms and firms with high firm-specific human capital. These results are consistent with theories predicting that firms hold cash to signal the credibility of their employment policies regarding job security.

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[Han, Syungjin] Hongik Univ, Coll Business Adm, Seoul, South Korea

[Kim, Changhyun] China Europe Int Business Sch CEIBS, Strategy & Entrepreneurship, Shanghai, Peoples R China


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Source

Applied Economics Letters

ISSN:1350-4851

Year:2021

Issue:Early Access

ESI Discipline:ECONOMICS & BUSINESS;

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