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Money held for moving stars: Talent competition and corporate cash holdings

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  • He, Zhaozhao

Abstract

Exploiting reforms of state covenants-not-to-compete laws to capture exogenous variation in barriers to compete for talent, I show that firms increase cash holdings when talent competition intensifies. The effect is concentrated among firms for which talent is more important and in industries relying more on knowledge-based competitive advantages. Furthermore, greater financial strength enables a firm to gain local talent market share at the expense of rivals, leading to superior product market performance. Supporting the idea that firms build up stronger financial positions to remain competitive in the labor market, these findings highlight corporate liquidity as a strategic variable to retain and attract mobile talent.

Suggested Citation

  • He, Zhaozhao, 2018. "Money held for moving stars: Talent competition and corporate cash holdings," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 210-234.
    • Handle: RePEc:eee:corfin:v:51:y:2018:i:c:p:210-234
    DOI: 10.1016/j.jcorpfin.2018.06.002
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    More about this item

    Keywords

    Cash holdings; Non-competes; Property rights; Talent competition; Skilled workers;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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