Abstract
We use the COVID shock to study the direct and interactive effects of several forms of corporate flexibility on short- and long-term business plans. We find that i) workplace flexibility, namely the ability for employees to work remotely, plays a central role in determining firms’ employment plans during the health crisis; ii) investment flexibility allows firms to modulate capital spending based on their business prospects in the crisis, with effects shaped by workplace flexibility; and iii) financial flexibility contributes to stronger employment and investment, especially when fixed costs are high. The role of workplace flexibility is new to the COVID-19 crisis and is expected to have long-lasting effects on corporate employment and investment.
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