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Corporate Cash and Employment

Author

Listed:
  • Philippe Bacchetta

    (UNIL - Université de Lausanne = University of Lausanne)

  • Kenza Benhima

    (UNIL - Université de Lausanne = University of Lausanne)

  • Céline Poilly

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

In the aftermath of the U.S. financial crisis, both a sharp drop in employment and a surge in corporate cash have been observed. In this paper, based on U.S. data, we argue that the negative relationship between the corporate cash ratio and employment is systematic, both over time and across firms. We develop a dynamic general equilibrium model where heterogenous firms need cash and external liquid funds in their production process. We analyze the dynamic impact of aggregate shocks and the cross-firm impact of idiosyncratic shocks. We show that external liquidity shocks generate a negative comovement between the cash ratio and employment, as documented in the data.

Suggested Citation

  • Philippe Bacchetta & Kenza Benhima & Céline Poilly, 2019. "Corporate Cash and Employment," Post-Print hal-01995011, HAL.
    • Handle: RePEc:hal:journl:hal-01995011
    DOI: 10.1257/mac.20150191
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-01995011
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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