Download This PaperEmployment, Corporate Investment and Cash Flow Risk
Alnahedh, S., Bhagat, S., & Obreja, I. (2019). Employment, Corporate Investment, and Cash-Flow Risk. Journal of Financial and Quantitative Analysis, 54(4), 1855-1898. doi:10.1017/S0022109019000437
92 Pages Posted: 6 Oct 2019
Date Written: September 25, 2017
Abstract
We highlight the role of cash flow uncertainty on corporate employment and investment. We find that a 1% increase in cash flow uncertainty leads to a 0.62% decrease in tangible investment, a 1.39% decrease in intangible investment, and a 3.67% decrease in corporate employment. Our results are statistically and economically significant. We further find that these relationships are stronger during economic recessions. Our findings have significant policy implications. To wit, if policy makers would like corporations to increase their employment and investment, they should focus on policies that decrease corporate cash flow uncertainty.
Keywords: Cash Flow Uncertainty, Investment, Employment, Investment Opportunity
JEL Classification: G30, G31, G32
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