Employment, 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

See all articles by Saad Alnahedh

Saad Alnahedh

University of Colorado at Boulder - Department of Finance

Sanjai Bhagat

University of Colorado at Boulder - Department of Finance

Iulian Obreja

SEC

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

Suggested Citation

Alnahedh, Saad and Bhagat, Sanjai and Obreja, Iulian, Employment, Corporate Investment and Cash Flow Risk (September 25, 2017). 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. Available at SSRN: https://ssrn.com/abstract=3459636

Saad Alnahedh

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States

Sanjai Bhagat (Contact Author)

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States
303-492-7821 (Phone)

Iulian Obreja

SEC ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

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