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Firms' Financial Policy and Labour Demand: Theory and Evidence

Author

Listed:
  • Bergström, Pål

    (Trade och Capital Markets)

  • Lindberg, Sara

    (Department of Economics)

Abstract

We investigate the influence of financial leverage on firms' hiring decisions in the context of a hierarchy of finance model. The analysis is based on the Euler equation of employment in the presence of convex adjustment costs. We show the empirical implications of firms facing a hierarchy of financial costs, and estimate a linearised version of the model on a large panel of Swedish manufacturing firms. Bootstrap methods are utilised to alleviate some of the estimation problems involved. The empirical findings indicate that the influence of financial leverage on firms' hiring decisions differs significantly between firms in different financial regimes.

Suggested Citation

  • Bergström, Pål & Lindberg, Sara, 1998. "Firms' Financial Policy and Labour Demand: Theory and Evidence," Working Paper Series 1998:18, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:1998_018
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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.
    2. Bergström, Pål, 1999. "Bootstrap Methods and Applications in Econometrics - A Brief Survey," Working Paper Series 1999:2, Uppsala University, Department of Economics.

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    More about this item

    Keywords

    Employment Determination; Financial Policy; Panel Data;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • 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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