Money held for moving stars: Talent competition and corporate cash holdings

Zhaozhao He

Journal of Corporate Finance, 2018, vol. 51, issue C, 210-234

Abstract: Exploiting reforms of state covenants-not-to-compete laws to capture exogenous variation in barriers to compete for talent, I show that firms increase cash holdings when talent competition intensifies. The effect is concentrated among firms for which talent is more important and in industries relying more on knowledge-based competitive advantages. Furthermore, greater financial strength enables a firm to gain local talent market share at the expense of rivals, leading to superior product market performance. Supporting the idea that firms build up stronger financial positions to remain competitive in the labor market, these findings highlight corporate liquidity as a strategic variable to retain and attract mobile talent.

Keywords: Cash holdings; Non-competes; Property rights; Talent competition; Skilled workers (search for similar items in EconPapers)
JEL-codes: D80 G32 J24 J44 K12 K31 O34 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:51:y:2018:i:c:p:210-234

DOI: 10.1016/j.jcorpfin.2018.06.002

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