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Stickiness of employee expenses and implications for stock returns

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  • Roi D. Taussig

    (Ariel University)

Abstract

This paper proposes a new measure for operating inflexibility based on firms’ downside stickiness of expenditures on employees. Firms are affected not only by labor unions, but also by human capital risks that influence firms’ expected stock returns. The contribution of the current study is to show, in general, that expenditures on employees affect firms’ operating inflexibility and thus account for higher stock returns. This may well be the first paper to conduct time-series predictability tests of market returns for market operating leverage, and to find a positive interaction in and out of sample.

Suggested Citation

  • Roi D. Taussig, 2017. "Stickiness of employee expenses and implications for stock returns," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 7(2), pages 297-309, August.
    • Handle: RePEc:spr:eurase:v:7:y:2017:i:2:d:10.1007_s40822-017-0070-4
    DOI: 10.1007/s40822-017-0070-4
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    Cited by:

    1. Taussig, Roi D., 2021. "Competition risk and expected stock returns," Finance Research Letters, Elsevier, vol. 41(C).

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    More about this item

    Keywords

    Asset pricing; Investment; Capacity; Wages;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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