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

2016 Fiscal Year Final Research Report

• 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
• Keywords: 資本コスト / 企業金融 / 労働市場

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.

Free Research Field

ファイナンス