Labor Skill and Dividend Policy

48 Pages Posted: 10 May 2021 Last revised: 28 Jun 2021

See all articles by Tilda Nguyen

Tilda Nguyen

University of Wisconsin - Whitewater - Finance and Business Law

Boochun Jung

University of Hawaii at Manoa - School of Accountancy

Yanhua Sunny Yang

University of Connecticut - School of Business; University of Connecticut - School of Business

Date Written: May 7, 2021

Abstract

We examine how firms’ labor skill heterogeneity affects dividend policy. Since it is more costly to hire, retain, and layoff skilled labor than unskilled labor, we hypothesize that firms relying more on skilled labor are more cautious in setting their dividend policy, which competes with funding for labor force. We find that firms with more skilled labor are less likely to distribute or increase dividends, and when they do so, the magnitudes are smaller. We further document that dividend increases by such firms are more strongly correlated with future earnings increases and are accompanied by stronger stock market reactions.

Keywords: Labor skill, Labor adjustment costs, Dividend policy

JEL Classification: G35, J3

Suggested Citation

Nguyen, Tilda and Jung, Boochun and Yang, Yanhua Sunny and Yang, Yanhua Sunny, Labor Skill and Dividend Policy (May 7, 2021). University of Connecticut School of Business Research Paper No. 21-10, Available at SSRN: https://ssrn.com/abstract=3841692 or http://dx.doi.org/10.2139/ssrn.3841692

Tilda Nguyen

University of Wisconsin - Whitewater - Finance and Business Law ( email )

Whitewater, WI 53190
United States

Boochun Jung (Contact Author)

University of Hawaii at Manoa - School of Accountancy ( email )

College of Business Administration
Honolulu, HI 96822
United States

Yanhua Sunny Yang

University of Connecticut - School of Business ( email )

2100 Hillside Road
Storrs, CT 06269-1041
United States
8604864696 (Phone)
8604864838 (Fax)

HOME PAGE: http://www.business.uconn.edu/person/yanhua-sunny-yang/

University of Connecticut - School of Business ( email )

2100 Hillside Rd, Unti 1041A
Storrs, CT 06238
United States
8604864696 (Phone)

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