Robots, Labor Market Frictions, and Corporate Financial Policies

36 Pages Posted: 23 Apr 2020 Last revised: 27 Jul 2021

See all articles by Yongqiang Chu

Yongqiang Chu

Belk College of Business, UNC Charlotte

Alice (Yanguang) Liu

University of Arizona, Eller College of Management, Department of Finance; University of South Dakota Beacom School of Business

Date Written: March 6, 2020

Abstract

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

Chu, Yongqiang and Liu, Yanguang, Robots, Labor Market Frictions, and Corporate Financial Policies (March 6, 2020). Available at SSRN: https://ssrn.com/abstract=3563906 or http://dx.doi.org/10.2139/ssrn.3563906

Yongqiang Chu (Contact Author)

Belk College of Business, UNC Charlotte ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
7046877695 (Phone)

Yanguang Liu

University of Arizona, Eller College of Management, Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tuscon, AZ Arizona 85721
United States

University of South Dakota Beacom School of Business ( email )

414 East Clark Street
Vermillion, SD 57069
United States

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