Financing Constraints and Workplace Safety

We present evidence that financing frictions adversely impact investment in workplace safety, with implications for worker welfare and firm value. Using several identification strategies, we find that injury rates increase with leverage and negative cash flow shocks, and decrease with positive cash...

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Bibliographic Details
Published in:The Journal of finance (New York) 2016-10, Vol.71 (5), p.2017-2058
Main Authors: COHN, JONATHAN B., WARDLAW, MALCOLM I.
Format: Article
Language:English
Subjects:
Assets
Cash flow
Debt
Economic crises
Employment
Financial leverage
Financing
Investment
Occupational health and safety
Occupational safety
Oil prices
Physical trauma
Studies
Workplaces
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Summary:We present evidence that financing frictions adversely impact investment in workplace safety, with implications for worker welfare and firm value. Using several identification strategies, we find that injury rates increase with leverage and negative cash flow shocks, and decrease with positive cash flow shocks. We show that firm value decreases substantially with injury rates. Our findings suggest that investment in worker safety is an economically important margin on which firms respond to financing constraints.
ISSN:0022-1082
1540-6261
DOI:10.1111/jofi.12430