Robots, Labor Market Frictions, and Corporate Financial Policy

50 Pages Posted: 21 Feb 2024 Last revised: 7 Nov 2024

See all articles by Alice (Yanguang) Liu

Alice (Yanguang) Liu

University of Arizona, Eller College of Management, Department of Finance; New Jersey Institute of Technology, Martin Tuchman School of Management

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

Suggested Citation

Liu, Yanguang, Robots, Labor Market Frictions, and Corporate Financial Policy (January 01, 2019). Available at SSRN: https://ssrn.com/abstract=4733665 or http://dx.doi.org/10.2139/ssrn.4733665

Yanguang Liu (Contact Author)

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

New Jersey Institute of Technology, Martin Tuchman School of Management ( email )

University Heights
Newark, NJ 07102
United States

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