Professors Jang-Chul Kim, Sharif Mazumder, and Qing Su investigated whether companies' potential to automate routine jobs affects how easily their stocks can be traded—what finance experts call "stock liquidity." Their findings challenge the conventional wisdom about the market effects of automation.
Companies with high automation potential—those employing many workers in routine, technology-replaceable roles—experience reduced stock liquidity. This effect intensifies during periods of rapid technological advancement and heightened market competition.
The team used the devastating 2011 Thai floods as a natural experiment, providing compelling evidence that the relationship between automation potential and stock liquidity is causal, not merely correlational. This methodological approach demonstrates the rigor and creativity our faculty bring to complex financial questions.
This research provides new insights for multiple stakeholders:
As artificial intelligence and robotics reshape the workplace, this research provides essential groundwork for understanding how technological transformation affects financial markets.
Abstract
This study investigates the impact of firms' potential to automate routine-task labor on stock liquidity. We demonstrate that firms with a high potential for automation (AP), characterized by a significant share of displaceable labor, experience a decline in stock liquidity. Our analysis shows that this association is particularly pronounced during positive technological shocks and heightened product market competition. Using the catastrophic 2011 Thai flooding as an exogenous shock to AP, we find evidence that the relationship between AP and liquidity is likely causal. The findings withstand rigorous testing, encompassing industry level analysis, propensity score matching, and the utilization of alternative proxies for both displaceable labor and stock liquidity. This examination is augmented by the inclusion of additional control variables. These results contribute to a deeper understanding of the interplay between automation, market dynamics, and liquidity, offering valuable insights for investors, policymakers, and firms navigating the evolving technological innovation landscape.
Link and Citation
Professors Kim, Mazumder, and Su Publish in International Review of Finance
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