We present evidence that financing frictions adversely impact investment in workplace safety, with implications for worker welfare and firm value. Using several identification strategies, we find that injury rates increase with leverage and negative cash flow shocks, and decrease with positive cash flow shocks. We show that firm value decreases substantially with injury rates. Our findings suggest that investment in worker safety is an economically important margin on which firms respond to financing constraints.Over 3.5 million workplace injuries and illnesses occur in the U.S. each year. The estimated annual cost of these injuries is $250 billion, more than the cost of all forms of cancer combined (Leigh (2001)). While workplace safety has been studied extensively in fields as diverse as industrial relations, operations management, and industrial-organizational psychology, its connections with finance remain largely unexplored. This paper studies how financing constraints impact workplace safety, which has implications for firm value and employee welfare.Firms invest resources in improving workplace safety just as they invest in research and development, property, plant, and equipment, and organizational capital. As with other forms of investment, spending on safety must be financed out of either internal cash flow or externally-raised capital. In a world with financing frictions, a firm's investment may be sensitive to the financial resources available to finance that investment. Thus the safety of a firm's workplaces could depend on the financial resources at its disposal. Investment in safety may be especially vulnerable to cuts in the face of financing constraints, as its payoffs accrue slowly over time and are difficult to evaluate.In this paper, we explore the impact of financing constraints on workplace safety by examining the sensitivity of workplace injury rates to the financial resources available to a firm using establishment-level injury data from the Bureau of Labor Statistics' (BLS') annual Survey of Occupational Injuries and Illnesses (SOII). As we lack exogenous variation in financial resources with which to completely isolate the effect of financing on injuries, we employ several empirical strategies. Each approach produces evidence pointing towards increased financial resource availability leading to fewer injuries, suggesting that financing constraints impair investment in safety. While any one piece of evidence is open to alternative interpretations, the evidence taken together is difficult to reconcile with any specific alternative.We begin by examining the empirical relationship between injury rates and well-established 1 Accepted ArticleThis article is protected by copyright. All rights reserved.drivers of a firm's capacity to finance investment, including cash flow, cash balances, and financial leverage. Cash balances and cash flow are sources of internal financing. Debt reduces cash flow through interest payments, and existing debt claims can make it difficult to raise additional extern...

A large and rapidly growing literature examines the impact of misvaluation on firm policies by using mutual fund outflow-induced price pressure to isolate nonfundamental price variation. I demonstrate that the standard approach to computing outflowinduced price pressure produces a measure that is inadvertently a direct function of a stock's actual realized return during the outflow quarter, raising doubts about its orthogonality to fundamentals. After removing these direct measurements of return, outflows generate a fairly negligible quarterly decline in returns, with no subsequent reversal, and many established results in this literature no longer hold. I provide suggestions for future analysis.

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This paper presents evidence of a large, persistent decline in establishment-level workplace injury rates after private equity (PE) buyouts of publicly traded U.S. firms. We find that firms experience fewer OSHA safety violations after buyouts and that a larger decline in injury rates is associated with an increased probability of exit via IPO. Employment reductions after buyouts are concentrated in relatively low-injury-risk establishments. Overall, our results suggest that buyouts improve workplace safety and that PE acquirers benefit from this improvement. We explore possible causes of these changes through interviews with executives of companies acquired in buyouts and through cross-sectional analysis.