Labor Protection Laws and Corporate Cash Holdings

Abstract

The research is conducted to find empirical evidence of labor laws impact on cash holdings for Norwegian firms in the timespan between 1998 and 2013. Further, it relates the main research with factors such as firm size, grade of labor-intensity and CEO gender to explain the findings. We use account-data to run panel data regressions with FE, and find that cash holdings increase with 6.82% for big sized labor-intensive firms when labor laws become strict. The results supports previous research by Serfling (2013) conducted in the US. The findings also contradict evidence from US regarding determinants of cash holdings, while complementing findings in Europe and hence suggest a degree of homogeneity among firms in Europe.