Corporate Cash and Employment

Kenza Benhima, Céline Poilly (celine.poilly@univ-amu.fr) and Philippe Bacchetta

No 256, 2014 Meeting Papers from Society for Economic Dynamics

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 document 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 in their production process. We analyze the dynamic impact of aggregate shocks and the cross-firm impact of idiosyncratic shocks. We show that liquidity and productivity shocks tend to generate a negative comovement between the cash ratio and employment. In contrast, standard credit shocks produce a positive relationship. A calibrated version of the model yields a negative comovement that is close to the data.

Date: 2014
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Corporate Cash and Employment (2019)
Working Paper: Corporate Cash and Employment (2019)
Working Paper: Corporate Cash and Employment (2014)
Working Paper: Corporate Cash and Employment (2014)
Working Paper: Corporate Cash and Employment (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:256

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