Labor investment efficiency and cash flow volatility

Xinhui Huang and Augustine Tarkom

Finance Research Letters, 2022, vol. 50, issue C

Abstract: We investigate the association between cash flow volatility and labor investment efficiency using a sample of US-listed firms from 2000 to 2021. We document a positive association between cash flow volatility and labor investment efficiency. We also document that dividend-paying firms are associated with higher labor investment efficiency; however, we estimated a negative interaction effect between cash flow risk and dividend-payout on labor investment efficiency. Our evidence suggests that in a competitive product market, volatile cash flow leads to increased labor investment efficiency. These findings enrich our understanding of how firms judiciously use their resources in times of uncertainty.

Keywords: Labor investment efficiency; Cash flow volatility; Dividend payout; Product market competition (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004299

DOI: 10.1016/j.frl.2022.103227

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