Abstract

http://ssrn.com/abstract=1923829
 
 

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Employment, Corporate Investment and Cash Flow Uncertainty


Sanjai Bhagat


University of Colorado at Boulder - Department of Finance

Iulian Obreja


University of Colorado at Boulder - Department of Finance

April 26, 2013


Abstract:     
The effect of uncertainty on equilibrium wage rates causes uncertainty to have a negative impact on marginal q. In turn, uncertainty reduces corporate investment and employment. Using a novel firm-level measure of cash flow uncertainty, we find empirically that uncertainty has a strong negative impact on corporate employment and investment in both tangible and intangible assets. Economically, if uncertainty were to revert to pre-crisis levels, employment would increase by 3.35 million jobs, investment in tangibles would increase by 1.54%, and investment in intangibles would increase by1.29%. Our findings are robust to alternative measures of uncertainty and different estimation techniques.

Number of Pages in PDF File: 46

Keywords: corporate investment, uncertainty, intangible capital, employment

JEL Classification: E22, E24, G31

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Date posted: September 8, 2011 ; Last revised: May 2, 2013

Suggested Citation

Bhagat, Sanjai and Obreja, Iulian, Employment, Corporate Investment and Cash Flow Uncertainty (April 26, 2013). Available at SSRN: http://ssrn.com/abstract=1923829 or http://dx.doi.org/10.2139/ssrn.1923829

Contact Information

Sanjai Bhagat
University of Colorado at Boulder - Department of Finance ( email )
Campus Box 419
Boulder, CO 80309
United States
303-492-7821 (Phone)
Iulian Obreja (Contact Author)
University of Colorado at Boulder - Department of Finance ( email )
Campus Box 419
Boulder, CO 80309
United States
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