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Do Financial Constraints Affect the Composition of Workers in a Firm?

Author

Listed:
  • Breunig, Robert

    () (Australian National University)

  • Hourani, Diana

    (Australian National University)

  • Bakhtiari, Sasan

    () (Department of Industry, Innovation and Science Australia)

  • Magnani, Elisabetta

    () (Macquarie University, Sydney)

Abstract

We study the relationship between financing constraints and the work- force composition of firms that employ both casual and non-casual workers. We use data on Australian firms from 2009-2014 and a more direct measure of firm financial constraint than previous studies. We show that the proportion of casual workers in firms grew over the time period being analysed. This was the case regardless of whether a firm was financially constrained or not. However, the magnitude of this change differed between financially constrained and unconstrained firms. We find that of firms whose workforces were growing, financially constrained firms hired relatively fewer casual workers than financially unconstrained firms did. This is consistent with firms using internal financing to cope with a lack of access to credit and equity.

Suggested Citation

  • Breunig, Robert & Hourani, Diana & Bakhtiari, Sasan & Magnani, Elisabetta, 2020. "Do Financial Constraints Affect the Composition of Workers in a Firm?," IZA Discussion Papers 12970, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12970
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    References listed on IDEAS

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    1. Campello, Murillo & Graham, John R. & Harvey, Campbell R., 2010. "The real effects of financial constraints: Evidence from a financial crisis," Journal of Financial Economics, Elsevier, vol. 97(3), pages 470-487, September.
    2. Nickell, Stephen & Nicolitsas, Daphne, 1999. "How does financial pressure affect firms?," European Economic Review, Elsevier, vol. 43(8), pages 1435-1456, August.
    3. Claudio Michelacci & Vincenzo Quadrini, 2009. "Financial Markets and Wages," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 795-827.
    4. Annalisa Ferrando & Alessandro Ruggieri, 2018. "Financial constraints and productivity: Evidence from euro area companies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 23(3), pages 257-282, July.
    5. Sean Cleary, 1999. "The Relationship between Firm Investment and Financial Status," Journal of Finance, American Finance Association, vol. 54(2), pages 673-692, April.
    6. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages 270-295, June.
    7. Andrea Caggese & Vicente Cuñat, 2008. "Financing Constraints and Fixed-term Employment Contracts," Economic Journal, Royal Economic Society, vol. 118(533), pages 2013-2046, November.
    8. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages 214-244, June.
    9. Bakhtiari, Sasan & Breunig, Robert & Magnani, Lisa & Zhang, Jacquelyn, 2020. "Financial Constraints and Small and Medium Enterprises: A Review," IZA Discussion Papers 12936, Institute of Labor Economics (IZA).
    10. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 169-215.
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    Cited by:

    1. Brunello, Giorgio & Gereben, Áron & Weiss, Christoph & Wruuck, Patricia, 2020. "Financing constraints and employers' investment in training," EIB Working Papers 2020/05, European Investment Bank (EIB).

    More about this item

    Keywords

    financial constraints; firm behaviour; employment patterns; casual work; Australia;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • J29 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Other
    • J49 - Labor and Demographic Economics - - Particular Labor Markets - - - Other

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