Corporate Cash and Employment

Philippe Bacchetta, Kenza Benhima and Céline Poilly ()

No 14-01, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: In the aftermath of the U.S. financial crisis, both a sharp drop in employment and a surge in corporate cash have been observed. In this paper, based on U.S. data, we document that the negative relationship between the corporate cash ratio and employment is systematic, both over time and across firms. We develop a dynamic general equilibrium model where heterogenous firms need cash in their production process and where financial shocks are made of both credit and liquidity shocks. We show that external liquidity shocks generate a negative comovement between the cash ratio and employment. We analyze the dynamic impact of aggregate shocks and the cross-firm impact of idiosyncratic shocks. With a calibrated version of the model, the model yields a negative comovement that is close to the data.

Keywords: working capital; liquidity shocks; cash management (search for similar items in EconPapers)
JEL-codes: E24 E44 G32 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2014-01
New Economics Papers: this item is included in nep-dge and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (14)

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http://ssrn.com/abstract=2554384 (application/pdf)

Related works:
Journal Article: Corporate Cash and Employment (2019)
Working Paper: Corporate Cash and Employment (2019)
Working Paper: Corporate Cash and Employment (2014)
Working Paper: Corporate Cash and Employment (2014)
Working Paper: Corporate Cash and Employment (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1401

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