Wages and Firm Performance: Evidence from the 2008 Financial Crisis
The effect of wage bargains on the stock market value of the firm
Paige Ouimet and
Review of Corporate Finance Studies, 2021, vol. 10, issue 2, 273-305
We examine the effect of higher wages on firm performance during the 2008 financial crisis. To identify variation in wages, we rely on heterogeneity in the timing of long-term wage agreements for a sample of U.K. firms. We instrument for firms signing long-term agreements overlapping with the crisis by the presence of a contract signed in 2006 or earlier and expiring before September 2008. Treated firms not only paid higher wages but also realized greater labor productivity relative to control firms. These findings are consistent with the intuition that opportunity cost differentials between treated and control firms induce employees to exert higher effort. (JEL J41, J30, J24, G01)Received February 28, 2019; editorial decision July 8, 2020 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:rcorpf:v:10:y:2021:i:2:p:273-305.
Access Statistics for this article
Review of Corporate Finance Studies is currently edited by Andrew Ellul
More articles in Review of Corporate Finance Studies from Oxford University Press
Bibliographic data for series maintained by Oxford University Press ().