Faculty of Economics and Business Administration Publications Database

Fighting for Talent: Risk-Taking, Corporate Volatility and Organisation Change

Gianetti, Mariassunta
Volume: 119
Number: 540
Pages: 1344 - 1373
Month: October
ISSN-Print: 0013-0133
Link External Source: Online Version
Year: 2009
Keywords: Debt; Consumer finance companies; Consumer credit; Personal loans; Labor supply; Labor market
Abstract: We show that access to finance may affect firms through the labour market. Talented workers want to realise their ideas but also seek insurance against income risk. Large firms default less often than small firms but they investigate more thoroughly and reject more good ideas. With easier access to consumer credit, talented workers become less averse to the income risk of working in small firms. Thus, small firms gain an advantage on the labour market, their profit volatility increases and large firms react by creating spin-offs. Existing and original empirical evidence is consistent with the implications of our theory.