Industrial Robots and Finance

73 Pages Posted: 3 Dec 2020 Last revised: 28 Jun 2021

See all articles by Xin Cheng

Xin Cheng

Zhongnan University of Economics and Law

Evgeny Lyandres

Tel Aviv University

Kaiguo Zhou

Sun Yat-Sen University (SYSU)

Tong Zhou

ShanghaiTech University

Date Written: May 1, 2021


We examine theoretically and empirically the effects of industrial robot adoption on firms’ financing. Industrial robots are unique in that they are a substitute for labor, whereas other types of physical assets are largely a complement for labor. As a result, robots provide a hedge for fluctuations in the price of labor. Our model shows that robot deployment reduces a firm's risk, decreases equilibrium interest rate, and increases debt capacity. We test these predictions using firm-level panel data on robot deployment in five Chinese provinces across multiple industries. Consistent with the role of robots in hedging labor price risk, robot adoption leads to higher leverage and lower cost of debt, at both the extensive and intensive margins. The staggered nature of the introduction of robot-friendly policies across provinces and industries allows us to make causal claims. The model's more refined predictions, concerning the effects of labor contribution and robot-labor substitution on the strength of the relation between robot adoption and corporate financing, are also borne out in the data.

Keywords: Industrial robots, leverage, interest rates, labor price uncertainty

JEL Classification: D24, E24, G32, O33

Suggested Citation

Cheng, Xin and Lyandres, Evgeny and Zhou, Kaiguo and Zhou, Tong, Industrial Robots and Finance (May 1, 2021). Available at SSRN: or

Xin Cheng

Zhongnan University of Economics and Law ( email )

No.143, Wuluo Road
Wuhan, Hubei 430073

Evgeny Lyandres (Contact Author)

Tel Aviv University ( email )

Ramat Aviv
Tel-Aviv, 6997801
6400241 (Fax)

Kaiguo Zhou

Sun Yat-Sen University (SYSU) ( email )

135, Xingang Xi Road
Guangzhou, Guangdong 510275

Tong Zhou

ShanghaiTech University ( email )

393 Middle Huaxia Road, Pudong
Shanghai, Shanghai 201210

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