Employment flexibility and cost of capital: A quasi-natural experiment in Japan

Research Project

Project/Area Number	25380411
Research Category	Grant-in-Aid for Scientific Research (C)
Allocation Type	Multi-year Fund
Section	一般
Research Field	Money/ Finance
Research Institution	International University of Japan
Principal Investigator	CHINO Atsushi 国際大学, 国際関係学研究科, 講師(移行) (30647988)
Project Period (FY)	2013-04-01 – 2017-03-31
Project Status	Completed (Fiscal Year 2016)
Budget Amount *help	¥4,940,000 (Direct Cost: ¥3,800,000、Indirect Cost: ¥1,140,000) Fiscal Year 2015: ¥130,000 (Direct Cost: ¥100,000、Indirect Cost: ¥30,000) Fiscal Year 2014: ¥2,470,000 (Direct Cost: ¥1,900,000、Indirect Cost: ¥570,000) Fiscal Year 2013: ¥2,340,000 (Direct Cost: ¥1,800,000、Indirect Cost: ¥540,000)
Keywords	資本コスト / 企業金融 / 労働市場 / 金融論
Outline of Final Research Achievements	We investigate whether an increasing use of temporary agency workers affects firms’ cost of equity capital. Exploiting a major labor market deregulation in Japan in early 2000s, which removed a legal restriction that had prohibited temporary agency workers from engaging in manufacturing works, we conduct a difference-in-difference estimation and find that cost of capital decreased in manufacturing firms, relative to other firms, after the parliament passed the revised law for deregulation in 2003. Further analysis using variations only within manufacturing firms supports our causal interpretations. Overall, we conclude that firms’ use of temporary agency workers increases their operating flexibility and decreases cost of capital.