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Does skilled labor risk matter to suppliers? Evidence from trade credit

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  • Joye Khoo
  • Adrian (Wai Kong) Cheung

Abstract

Failure to attract and retain skilled labor exposes firms to skilled labor risk. This paper examines whether and how skilled labor risk affects trade credit offered by suppliers. The empirical analyses show that firms with greater exposure to skilled labor risk are associated with a reduction in trade credit granted by suppliers. It is consistent with the view that the risk arising from the departures of skilled employees is detrimental to firms. A change in employees who are well‐connected with the suppliers undermines firms’ bargaining power with their suppliers. Organization capital, managerial ability, and financial constraint are important moderators.

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  • Joye Khoo & Adrian (Wai Kong) Cheung, 2023. "Does skilled labor risk matter to suppliers? Evidence from trade credit," The Financial Review, Eastern Finance Association, vol. 58(2), pages 423-447, May.
    • Handle: RePEc:bla:finrev:v:58:y:2023:i:2:p:423-447
    DOI: 10.1111/fire.12332
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