Product Market Competition, Labor Mobility, and the Cross-Section of Stock Returns

Ahmed, Shamim ORCID: 0000-0003-3712-5213, Bu, Ziwen and Ye, Xiaoxia ORCID: 0000-0002-5024-6186
(2023) Product Market Competition, Labor Mobility, and the Cross-Section of Stock Returns. The Review of Asset Pricing Studies.

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<jats:title>Abstract</jats:title><jats:p>This paper explores the impact of product market competition on the positive relation between labor mobility (LM) and future returns. We develop a production-based model and formalize the intuition that low exposure to systematic risk in a concentrated industry limits LM’s amplifying effect on operating leverage. Therefore, the model predicts a stronger positive relation between LM and expected returns for firms in competitive industries. Consistent with the model’s prediction, we empirically find that LM predicts returns only among firms in competitive industries. This evidence suggests that the intensity of competition in firms’ product market potentially drives the positive LM-return relation. (JEL G12, G14, J69)</jats:p><jats:p>Received March 15, 2022; editorial decision December 17, 2022 by Editor Hui Chen. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.</jats:p>

Item Type: Article
Depositing User: Symplectic Admin
Date Deposited: 10 Nov 2022 15:34
Last Modified: 20 Mar 2023 17:22
DOI: 10.1093/rapstu/raad001
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