Abstract
This paper investigates how a firm's employment stability affects the level of its cash holdings. We find that firms with high employment stability (as measured by one minus a firm's employment elasticity with respect to its sales) maintain large cash holdings. The positive effect of employment stability on cash holdings is stronger for R&D intensive firms and firms with high firm-specific human capital. These results are consistent with theories predicting that firms hold cash to signal the credibility of their employment policies regarding job security.
Original language | English |
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Journal | Applied Economics Letters |
Issue number | Early Access |
DOIs | |
Publication status | Published - 2021 |
Corresponding author email
sjhan7@hongik.ac.krKeywords
- Cash holdings
- employment stability
- implicit contract
- job security
Indexed by
- ABDC-B
- SSCI
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Han, S., & Kim, C. H. (2021). Employment stability and corporate cash holdings. Applied Economics Letters, (Early Access). https://doi.org/10.1080/13504851.2021.1967274