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Firm risk, investment, and employment growth

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  • Matts Rosenberg

Abstract

This paper examines the relation between firm risk and growth of Finnish firms. The results reveal a negative relation between risk (total and unsystematic risk) and firm investment. This negative relation is robust to the choice of estimation method. The results also suggest that labor-intensive firms respond to increased risk by substituting capital for labor. Discrete decision models reassure the main conclusions by showing that greater risk decreases (increases) the likelihood of simultaneous growth (decline) investment and employment. Copyright Springer 2004

Suggested Citation

  • Matts Rosenberg, 2004. "Firm risk, investment, and employment growth," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(2), pages 164-184, June.
    • Handle: RePEc:spr:jecfin:v:28:y:2004:i:2:p:164-184
    DOI: 10.1007/BF02761609
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    References listed on IDEAS

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    Cited by:

    1. Demir, Firat, 2010. "Exchange Rate Volatility and Employment Growth in Developing Countries: Evidence from Turkey," World Development, Elsevier, vol. 38(8), pages 1127-1140, August.
    2. Appelbaum, Elie & Katz, Eliakim, 1986. "Measures of Risk Aversion and Comparative Statics of Industry Equilibrium," American Economic Review, American Economic Association, vol. 76(3), pages 524-529, June.
    3. Demir, Firat, 2013. "Growth under exchange rate volatility: Does access to foreign or domestic equity markets matter?," Journal of Development Economics, Elsevier, vol. 100(1), pages 74-88.
    4. Serhan Cevik & Richard D. F. Harris & Fatih Yilmaz, 2017. "Soft power and exchange rate volatility," International Finance, Wiley Blackwell, vol. 20(3), pages 271-288, December.
    5. Anubha Dhasmana, 2021. "Employment growth in the face of exchange rate uncertainty: The role of trade and foreign equity finance," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 79-117, July.
    6. Osama Wagdi & Yasmeen Tarek, 2019. "The impact of financial risk on systematic risks: international evidence," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(6), pages 1-11.

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