Robots, Labor Market Frictions, and Corporate Financial Policies
36 Pages Posted: 23 Apr 2020 Last revised: 27 Jul 2021
Date Written: March 6, 2020
Using a novel dataset on industrial robots from the International Federation of Robotics (IFR), we find that the use of robots leads to higher leverage and lower cash holdings. Using an instrumental variable based on the comparative advantage of robots in specific tasks, we find that effect is likely to be causal. Further analyses show that the effect is driven by the decreases in operating leverage when firms use more robots. We also find that the effect is stronger when firms are hit by negative shocks, suggesting that the use of robots mitigates labor market frictions and increases operating flexibility.
Keywords: capital structure; robots; cash holdings; operating leverage
JEL Classification: G30, J0, O0
Suggested Citation: Suggested Citation