Robots, Labor Market Frictions, and Corporate Financial Policy
50 Pages Posted: 21 Feb 2024 Last revised: 7 Nov 2024
Date Written: January 01, 2019
Abstract
We construct a novel firm-level measure of robot exposure using the International Federation of Robotics (IFR) dataset and new robot patent data. 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 the effect is likely to be causal and driven by the reduced operating leverage. The effect is stronger when firms are hit by negative shocks including minimum wage hikes and foreign competition. Firms with more robots pay out more and use fewer corporate hedging contracts.
Keywords: capital structure, robots, cash holdings, operating leverage, labor and finance
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