Corporate Cash and Employment

Philippe Bacchetta, Kenza Benhima and Céline Poilly ()

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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 argue 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 and external liquid funds in their production process. We analyze the dynamic impact of aggregate shocks and the cross-firm impact of idiosyncratic shocks. We show that external liquidity shocks generate a negative comovement between the cash ratio and employment, as documented in the data.

Date: 2019-07
New Economics Papers: this item is included in nep-dge
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-01995011
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Citations: View citations in EconPapers (18)

Published in American Economic Journal: Macroeconomics, 2019, 11 (3), pp.30-66. ⟨10.1257/mac.20150191⟩

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Related works:
Journal Article: 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)
Working Paper: Corporate Cash and Employment (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01995011

DOI: 10.1257/mac.20150191

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