Cash Holdings and Labor Heterogeneity: The Role of Skilled Labor

Review of Financial Studies (RFS), Forthcoming

66 Pages Posted: 2 Mar 2017

See all articles by Mohamed Ghaly

Mohamed Ghaly

Lancaster University - Department of Accounting and Finance

Viet Anh Dang

Alliance Manchester Business School

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School

Date Written: March 21, 2014

Abstract

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 varies with firms’ exogenous exposure to upward and downward labor adjustment costs and their incentives to make those adjustments. It is more pronounced for firms that are constrained, attach a high value to human capital, or operate in competitive markets.

Keywords: Cash Holdings, Skilled Labor, Labor Adjustment Costs, Labor Heterogeneity

JEL Classification: G32, G34, M54

Suggested Citation

Ghaly, Mohamed and Dang, Viet Anh and Stathopoulos, Konstantinos, Cash Holdings and Labor Heterogeneity: The Role of Skilled Labor (March 21, 2014). Review of Financial Studies (RFS), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2925876

Mohamed Ghaly (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Bailrigg
Lancaster, LA1 4YX
United Kingdom
+44 (0)1524 594526 (Phone)

Viet Anh Dang

Alliance Manchester Business School ( email )

AMBS Crawford House
Booth Street West
Manchester, Greater Manchester M15 6PB
United Kingdom
+44(0)16127 50438 (Phone)

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School ( email )

AMBS Building
Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 275 6863 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.research.manchester.ac.uk/portal/K.Stathopoulos.html

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