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Risk and Value in Labour and Capital Markets: The UK Corporate Economy, 1980-2005

36 Pages Posted: 8 Aug 2010  

Steve Toms

University of Leeds - Leeds University Business School (LUBS); University of Leeds - Division of Accounting and Finance

A. Salama

Newcastle University (UK) - Business School

Date Written: August 9, 2009

Abstract

The paper sets out a theoretical model linking stock market financial risk to labour market conditions, including labour intensity and the risk arising from the specification of labour contracts. A value added analysis is conducted combining national and firm level accounts data to examine the relationship between the share of value and the share of risk, contrasting manufacturing and service industries. In conjunction with a firm level analysis, empirical support for the model is established showing rational trade-offs between the risk and value appropriations of investors and employees and a less rational accumulation of structured debt finance as the UK economy has shifted from manufacturing to services in the last 30 years. The shift to services, flexibility and deregulation has tended to promote labour intensity, inflexibility of cost structures, and, as a consequence greater financial risk.

Keywords: Operating, financial, leverage, risk, labour, flexible

JEL Classification: J30, P34

Suggested Citation

Toms, Steve and Salama, A., Risk and Value in Labour and Capital Markets: The UK Corporate Economy, 1980-2005 (August 9, 2009). Available at SSRN: https://ssrn.com/abstract=1654457 or http://dx.doi.org/10.2139/ssrn.1654457

Steve Toms (Contact Author)

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom

Aly Salama

Newcastle University (UK) - Business School ( email )

Newcastle upon Tyne, NE1 4SE
United Kingdom

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