Workplace Automation and Corporate Liquidity Policy

Thomas W. Bates (), Fangfang Du () and Jessie Jiaxu Wang ()
Additional contact information
Thomas W. Bates: Finance, W. P. Carey School of Business, Arizona State University, Tempe, Arizona 85287
Fangfang Du: College of Business and Economics, California State University, Fullerton, California 92831
Jessie Jiaxu Wang: Board of Governors of the Federal Reserve System, Washington, District of Columbia 20551

Management Science, 2025, vol. 71, issue 2, 1287-1314

Abstract: Using an occupational probability of computerization, we measure a firm’s ability to replace labor with automated capital. Our evidence suggests that the potential to automate a workforce enhances operating flexibility, allowing firms to hold less precautionary cash. To provide evidence for this mechanism, we exploit the 2011–2012 Thailand hard drive crisis as an exogenous shock to the cost of automation. In addition, the negative relation between prospective automation and cash holdings is greater for firms with a lower expected cost of worker displacement and greater labor-induced operating leverage.

Keywords: automation; operating flexibility; corporate liquidity policy; substitutability of labor with automated capital; labor-induced operating leverage (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2021.03902 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:2:p:1287-1314

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().