Financial constraints and workforce environment: An international investigation

Ahsan Habib, Mabel D. Costa, Hedy J. Huang and Xuan S. Sun

International Review of Finance, 2021, vol. 21, issue 3, 1056-1067

Abstract: We examine the association between financial constraints and workforce environment. Using data from 43 countries for the period 2002–2017, we find that financially constrained firms tend to have poor workforce environments. In addition, we investigate the impact of country‐level employment protection legislation (EPL) on this association. It is evident from our results that the investment decisions of firms under financial constraints are conditional on the strictness of EPL. Our findings provide important practical implications for international policy makers, in particular, about the significance of EPL for workforce environments. Our study also contributes to the scant literature on the determinants of workforce environment and provides robust international evidence on the detrimental effects of financial constraints on workforce environments.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:bla:irvfin:v:21:y:2021:i:3:p:1056-1067

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