Stickiness of employee expenses and implications for stock returns

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


This paper proposes a new measure for operating inflexibility based on firms’ downside stickiness of expenditures on employees. Firms are affected not only by labor unions, but also by human capital risks that influence firms’ expected stock returns. The contribution of the current study is to show, in general, that expenditures on employees affect firms’ operating inflexibility and thus account for higher stock returns. This may well be the first paper to conduct time-series predictability tests of market returns for market operating leverage, and to find a positive interaction in and out of sample.

Original languageEnglish
Pages (from-to)297-309
Number of pages13
JournalEurasian Economic Review
Issue number2
StatePublished - 1 Aug 2017


  • Asset pricing
  • Capacity
  • Investment
  • Wages


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