Labor-Capital Substitution and Capital Structure: Evidence from Automation
Finance & Accounting
|Speaker:||Yan Wang, McMaster University|
|Date: ||Wednesday 9 December 2020|
|Time: ||16:00 - 17:00|
|Location: ||Online via Zoom (link available from J.Lashkor@exeter.ac.uk)|
This paper presents evidence that the exposure to automation technologies has a positive impact
on a firm’s financial leverage. The effects are more pronounced in firms with greater labor costs,
routine task intensity, firing costs, and union coverage. The results are robust when we instrument
a firm’s exposure to automation technologies using the robotics adoption in European countries.
Our analysis suggests that the exposure to automation technologies creates a replacement threat
that weakens workers’ bargaining power, compressing their wage premiums for bearing financial
distress risk and reducing wage rigidity, both of which allow firms to increase financial leverage.