The dark side of asset redeployability through the lens of corporate employment decisions

• Published in: Journal of corporate finance (Amsterdam, Netherlands) Netherlands), 2023-10, Vol.82, p.102462, Article 102462
• Main Authors: Le, Anh-Tuan, Ouyang, Puman
• Format: Article
• Language: English
• Subjects: Asset redeployability; Financial report quality; Labor investment efficiency
• ISSN: 0929-1199; 1872-6313
• DOI: 10.1016/j.jcorpfin.2023.102462

This study examines how U.S.-listed firms' asset redeployability affects their labor investment efficiency and documents a negative relationship between asset redeployability and labor investment efficiency. Asset redeployability increases overinvestment in labor in the forms of over-hiring and under-firing and provides managers more opportunities to conduct earnings management, which reduces financial reporting quality, readability, and comparability, thereby harming labor investment efficiency. Furthermore, our additional results indicate that the negative impact of asset redeployability on labor investment efficiency is mitigated for firms that have a higher degree of unionization, employ more skilled labor, or implement better corporate governance practices. •We study the effect of asset redeployability on firm-level labor investment efficiency.•Asset redeployability increases overinvestment in labor.•The quality, readability, and comparability of financial reporting are possible channels leading to the negative impact of asset redeployability on labor investment efficiency.•The negative effect is less pronounced for firms that are more unionized, employ more skilled labor, or have better corporate governance practices.