Document Type

Article

Publication Date

2025

DOI

10.1016/j.iref.2024.103814

Publication Title

International Review of Economics and Finance

Volume

97

Pages

103814 (1-16)

Abstract

Highlights

• Because skilled workers entail higher hiring and firing expenses, firms tend to retain skilled workers in the face of the high labor adjustment costs (LACs).

• The retention of skilled workers imposes inflexibility on business operations and exposes firms to cash flow shocks.

• Firms with high LACs hoard precautionary cash in the face of higher cash flow risk.

• We find a positive relationship between LACs and externally financed firm growth.

• Equity is the major source of external funds for firm growth in the face of high LACs.

• The retention of skilled workers elevates conflicts between financial and non-financial stakeholders of the firm.

• Ineffective monitoring is a channel connecting LACs and externally financed growth.

Rights

© 2024 The Authors. This is an open access article under the Creative Commons Attribution 4.0 International (CC BY 4.0) License.

Comments

Data availability statement: Article states: "The authors do not have permission to share data."

Original Publication Citation

An, E., & Yung, K. (2025). Labor heterogeneity, labor adjustment costs, and externally financed firm growth. International Review of Economics and Finance, 97, 1-16, Article 103814. https://doi.org/10.1016/j.iref.2024.103814

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