What Drives Firms’ Hiring Decisions? An Asset Pricing Perspective

Frederico Belo; Andres Donangelo; Xiaoji Lin; Ding Luo

doi:10.1093/rfs/hhad012

What Drives Firms’ Hiring Decisions? An Asset Pricing Perspective

Frederico Belo^*
, Andres Donangelo
, Xiaoji Lin
, Ding Luo

^*Corresponding author for this work

Department of Economics and Finance

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

5 Citations (Scopus)

71 Downloads (CityUHK Scholars)

Abstract

We document that the aggregate hiring rate of publicly traded firms in the U.S. economy negatively predicts stock market returns and long-term cash flows, and positively predicts short-term cash flows. In addition, through a variance decomposition, we show that the time-series variation in the aggregate hiring rate is mainly driven by changes in discount rates and short-term expected cash flows, with no contribution from variation in long-term expected cash flows. We estimate a neoclassical dynamic model with labor market frictions and show that labor adjustment costs and time-varying risk are essential for the model to replicate the empirical patterns. © 2023 The Author(s).

Original language	English
Pages (from-to)	3825–3860
Number of pages	36
Journal	Review of Financial Studies
Volume	36
Issue number	8
Online published	9 Feb 2023
DOIs	https://doi.org/10.1093/rfs/hhad012
Publication status	Published - Sept 2023

Bibliographical note

Research Unit(s) information for this publication is provided by the author(s) concerned.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

Publisher's Copyright Statement

COPYRIGHT TERMS OF DEPOSITED POSTPRINT FILE: This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Financial Studies following peer review. The version of record Belo, F., Donangelo, A., Lin, X., & Luo, D. (2023). What Drives Firms’ Hiring Decisions? An Asset Pricing Perspective. Review of Financial Studies, 36(8), 3825–3860. https://doi.org/10.1093/rfs/hhad012 is available online at: https://academic.oup.com/rfs/article/36/9/3825/7033471.

Access Output

10.1093/rfs/hhad012

158560361.pdfPost-print, 1.26 MB

Other Access Options

Check CityUHK Library

Permanent Link

Right click to copy link

Cite this

@article{88ef2e15752d4860a50e275c74863d3d,

title = "What Drives Firms{\textquoteright} Hiring Decisions? An Asset Pricing Perspective",

abstract = "We document that the aggregate hiring rate of publicly traded firms in the U.S. economy negatively predicts stock market returns and long-term cash flows, and positively predicts short-term cash flows. In addition, through a variance decomposition, we show that the time-series variation in the aggregate hiring rate is mainly driven by changes in discount rates and short-term expected cash flows, with no contribution from variation in long-term expected cash flows. We estimate a neoclassical dynamic model with labor market frictions and show that labor adjustment costs and time-varying risk are essential for the model to replicate the empirical patterns. {\textcopyright} 2023 The Author(s).",

author = "Frederico Belo and Andres Donangelo and Xiaoji Lin and Ding Luo",

note = "Research Unit(s) information for this publication is provided by the author(s) concerned.",

year = "2023",

month = sep,

doi = "10.1093/rfs/hhad012",

language = "English",

volume = "36",

pages = "3825–3860",

journal = "Review of Financial Studies",

issn = "0893-9454",

publisher = "Oxford University Press",

number = "8",

}

TY - JOUR

T1 - What Drives Firms’ Hiring Decisions? An Asset Pricing Perspective

AU - Belo, Frederico

AU - Donangelo, Andres

AU - Lin, Xiaoji

AU - Luo, Ding

N1 - Research Unit(s) information for this publication is provided by the author(s) concerned.

PY - 2023/9

Y1 - 2023/9

N2 - We document that the aggregate hiring rate of publicly traded firms in the U.S. economy negatively predicts stock market returns and long-term cash flows, and positively predicts short-term cash flows. In addition, through a variance decomposition, we show that the time-series variation in the aggregate hiring rate is mainly driven by changes in discount rates and short-term expected cash flows, with no contribution from variation in long-term expected cash flows. We estimate a neoclassical dynamic model with labor market frictions and show that labor adjustment costs and time-varying risk are essential for the model to replicate the empirical patterns. © 2023 The Author(s).

AB - We document that the aggregate hiring rate of publicly traded firms in the U.S. economy negatively predicts stock market returns and long-term cash flows, and positively predicts short-term cash flows. In addition, through a variance decomposition, we show that the time-series variation in the aggregate hiring rate is mainly driven by changes in discount rates and short-term expected cash flows, with no contribution from variation in long-term expected cash flows. We estimate a neoclassical dynamic model with labor market frictions and show that labor adjustment costs and time-varying risk are essential for the model to replicate the empirical patterns. © 2023 The Author(s).

UR - https://www.scopus.com/pages/publications/85169809405

UR - https://www.scopus.com/pages/publications/85169809405#tab=impact

U2 - 10.1093/rfs/hhad012

DO - 10.1093/rfs/hhad012

M3 - RGC 21 - Publication in refereed journal

SN - 0893-9454

VL - 36

SP - 3825

EP - 3860

JO - Review of Financial Studies

JF - Review of Financial Studies

IS - 8

ER -

What Drives Firms’ Hiring Decisions? An Asset Pricing Perspective

Abstract

Bibliographical note

UN SDGs

Publisher's Copyright Statement

Access Output

Other Access Options

Permanent Link

Other Files and Links

Fingerprint

Cite this