Publishing type：Research paper (scientific journal)   Publisher：Wiley  

DOI： 10.1111/fima.12376

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Other Link： https://onlinelibrary.wiley.com/doi/full-xml/10.1111/fima.12376

Publishing type：Research paper (scientific journal)   Publisher：Cambridge University Press (CUP)  

Abstract

I examine whether firms’ use of alternative work arrangements, particularly temporary agency workers, affects their cost of equity. Exploiting a major labor-market deregulation in Japan that induced manufacturing firms to increase their employment of temporary agency workers, I show that the cost of equity decreased in manufacturing firms, relative to nonmanufacturing firms, after the deregulation. Further analysis using variations within manufacturing firms provides corroborating evidence. The rigidity in labor expenses and the cost of debt also decreased in manufacturing firms. Overall, alternative work arrangements increase the flexibility in labor costs, leading to lower operating leverage and cost of capital.

DOI： 10.1017/s002210901900108x

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Language：English   Publishing type：Research paper (scientific journal)   Publisher：ELSEVIER SCIENCE BV  

While previous literature documents weak effects of unionization on payout policy on average, we find that this average relationship hides significant heterogeneous effects of unionization on payouts across firms that depend on firm profitability. The effect of unionization on payouts is negative for low-profitability firms but positive for high-profitability firms. We posit that labor unions (i) increase operating risk, which negatively affects payouts, but (ii) increase potential for rent extraction from unions, which could induce shareholders to demand positive payouts. Higher profitability mitigates the negative effect while strengthening the positive effect, making the relation between unionization and payouts less negative or more positive. We provide evidence consistent with both the negative and positive effects of unionization on payouts. Our empirical design mitigates endogeneity concerns. Further, an instrumental variable analysis and a cross-sectional test using right-to-work laws confirm that endogeneity is unlikely to drive our results. (C) 2016 Elsevier B.V. All rights reserved.

DOI： 10.1016/j.jcorpfin.2016.08.017

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