The dark side of asset redeployability through the lens of corporate employment decisions

Anh-Tuan Le and Puman Ouyang

Journal of Corporate Finance, 2023, vol. 82, issue C

Abstract: This study examines how U.S.-listed firms' asset redeployability affects their labor investment efficiency and documents a negative relationship between asset redeployability and labor investment efficiency. Asset redeployability increases overinvestment in labor in the forms of over-hiring and under-firing and provides managers more opportunities to conduct earnings management, which reduces financial reporting quality, readability, and comparability, thereby harming labor investment efficiency. Furthermore, our additional results indicate that the negative impact of asset redeployability on labor investment efficiency is mitigated for firms that have a higher degree of unionization, employ more skilled labor, or implement better corporate governance practices.

Keywords: Asset redeployability; Labor investment efficiency; Financial report quality (search for similar items in EconPapers)
JEL-codes: E22 E24 G31 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:82:y:2023:i:c:s0929119923001116

DOI: 10.1016/j.jcorpfin.2023.102462

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