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Firms' Financial Policy and Labour Demand: Theory and Evidence

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  • Bergstrom, P.
  • Lindberg, S.

Abstract

This paper investigates the influence of financial leverage on firms' intertemporal hiring decisions in the context of the hierarchy of finance approach to coporate finance. We derive the Euler equation of employment in the presence of convex adjustment costs, and show the empirical implications of firms facing a hierarchy of financial costs. A linearised version of the model is estimated on a large panel of Swedish manufacturing firms over the period 1979-88.

Suggested Citation

  • Bergstrom, P. & Lindberg, S., 1998. "Firms' Financial Policy and Labour Demand: Theory and Evidence," Papers 1998:18, Uppsala - Working Paper Series.
  • Handle: RePEc:fth:uppaal:1998:18
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    References listed on IDEAS

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    Cited by:

    1. le Grand, Carl, 2000. "On-the-job training, firm resources and unemployment risks: an analysis of the Swedish recession 1991-1993," Working Paper Series 2000:3, IFAU - Institute for Evaluation of Labour Market and Education Policy.

    More about this item

    Keywords

    LABOUR MARKET ; BUSINESS FINANCING ; BUSINESS CYCLES;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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