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Risk and value in labour and capital markets: The UK corporate economy, 1980-2005

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  • Toms, Steven
  • Salama, Aly

Abstract

The paper sets out a theoretical model linking stock market financial risk to labour market conditions, including labour intensity and the risk arising from the specification of labour contracts. A value added analysis is conducted combining national and firm level accounts data to examine the relationship between the share of value and the share of risk, contrasting manufacturing and service industries. In conjunction with a firm level analysis, empirical support for the model is established showing rational trade-offs between the risk and value appropriations of investors and employees and a less rational accumulation of structured debt finance as the UK economy has shifted from manufacturing to services in the last 30 years. The shift to services, flexibility and deregulation has tended to promote labour intensity, inflexibility of cost structures, and, as a consequence greater financial risk.

Suggested Citation

  • Toms, Steven & Salama, Aly, 2009. "Risk and value in labour and capital markets: The UK corporate economy, 1980-2005," The York Management School Working Papers 48, The York Management School, University of York.
    • Handle: RePEc:wrc:ymswp1:48
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    File URL: https://eprints.whiterose.ac.uk/11229/1/wp48SToms.pdf
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    References listed on IDEAS

    as
    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. James L. Davis & Eugene F. Fama & Kenneth R. French, 2000. "Characteristics, Covariances, and Average Returns: 1929 to 1997," Journal of Finance, American Finance Association, vol. 55(1), pages 389-406, February.
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    Cited by:

    1. Steven Toms, 2014. "Accounting-based Risk Management and the Capital Asset Pricing Model: An Empirical Comparison," Australian Accounting Review, CPA Australia, vol. 24(2), pages 127-133, June.

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