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Labor investment efficiency and cash flow volatility

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  • Huang, Xinhui
  • Tarkom, Augustine

Abstract

We investigate the association between cash flow volatility and labor investment efficiency using a sample of US-listed firms from 2000 to 2021. We document a positive association between cash flow volatility and labor investment efficiency. We also document that dividend-paying firms are associated with higher labor investment efficiency; however, we estimated a negative interaction effect between cash flow risk and dividend-payout on labor investment efficiency. Our evidence suggests that in a competitive product market, volatile cash flow leads to increased labor investment efficiency. These findings enrich our understanding of how firms judiciously use their resources in times of uncertainty.

Suggested Citation

  • Huang, Xinhui & Tarkom, Augustine, 2022. "Labor investment efficiency and cash flow volatility," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004299
    DOI: 10.1016/j.frl.2022.103227
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    References listed on IDEAS

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    Cited by:

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    4. Tan, Wenhao & Chen, Ying & Sun, Yun & Guo, Xiuyuan & Li, Ziwei, 2023. "Internal capital markets and risk-taking: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).

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