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  • 2021
  • Working Paper
  • HBS Working Paper Series

Financial Flexibility and Corporate Employment

By: Rebecca Lester, Ethan Rouen and Braden Williams
  • Format:Print
  • | Language:English
  • | Pages:70
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Abstract

We study the role of financial flexibility on COVID-19 employment actions. Using daily data from March through May 2020 for 354 of the largest U.S. employers, we find that firms facing a negative demand shock were 28.8 percentage points more likely to reduce their workforce and 17.3 percentage points less likely to provide pay increases to frontline workers, compared to other sample firms. Pre-pandemic financial flexibility attenuates these effects, reducing the likelihood of workforce reductions by almost half. The role of financial flexibility is greatest in firms with better governance, a more asymmetric cost structure, and better treatment of workers.

Keywords

Financial Flexibility; COVID-19; Pandemic; Employment; Health Pandemics; System Shocks; Finance

Citation

Lester, Rebecca, Ethan Rouen, and Braden Williams. "Financial Flexibility and Corporate Employment." Harvard Business School Series in Accounting and Control, No. 21-119, April 2021.
  • SSRN
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About The Author

Ethan C. Rouen

Accounting and Management
→More Publications

More from the Authors

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    Passing the Mic: Career and Firm Outcomes of Executive Interactions

    By: Wei Cai, Ethan Rouen and Yuan Zou
    • February 2022
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    Creating and Measuring Purpose at Viega

    By: Ethan Rouen, Suraj Srinivasan and James Barnett
    • Journal of Financial Economics

    Core Earnings: New Data and Evidence

    By: Ethan Rouen, Eric C. So and Charles C.Y. Wang
More from the Authors
  • Passing the Mic: Career and Firm Outcomes of Executive Interactions By: Wei Cai, Ethan Rouen and Yuan Zou
  • Creating and Measuring Purpose at Viega By: Ethan Rouen, Suraj Srinivasan and James Barnett
  • Core Earnings: New Data and Evidence By: Ethan Rouen, Eric C. So and Charles C.Y. Wang
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