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      •   BUIR Home
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      • Theses - Department of Management
      • Dept. of Management - Ph.D. / Sc.D.
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      Inflexible firm commitments, operating leverage risk and expected returns

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      Embargo Lift Date: 2016-12-12
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      Author
      Doğan, Figen Güneş
      Advisor
      Aydoğan, Kürşat
      Date
      2015-07
      Publisher
      Bilkent University
      Language
      English
      Type
      Thesis
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      Abstract
      Labor is one of the most important input to the firm. Firms pay wages to employees in return for their human capital. Operating leases are the largest source of external financing to the firm. Labor costs and non-cancellable operating lease expenses are two large claims on firm cash flows. This dissertation is focused on how these almost fixed costs affect firm risk and expected returns. Three essays empirically examine the links among cost inflexibility, cash flow sensitivity to business cycle and operating leverage risk. The first essay empirically documents that firms with more operating lease commitments earn a significant premium over firms with fewer commitments, and this premium is countercyclical. The second essay shows that a measure of firm’s labor intensity relative to its industry is associated with higher equity returns for manufacturing firms. The third essay, using ex-ante implied cost of capital as a proxy for equity risk, shows that the firms that carry a relatively high labor share, have higher ex-ante discount rates.
      Keywords
      Operating leverage
      Operating lease
      Labor
      Cross section of expected returns
      Implied cost of capital
      Permalink
      http://hdl.handle.net/11693/29161
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      • Dept. of Management - Ph.D. / Sc.D. 27
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