Seminar – Insurance Between Firms: The Role of Internal Labour Markets

Dr Giacinta Cestone, Cass Business School

This seminar will explore how business groups use internal labour markets (ILMs) in response to changing economic conditions. We show that group affiliated units faced with positive shocks to growth opportunities gain market share relying on their ILM to ensure swift hiring, especially of managers, high skill workers and skilled blue-collar workers. There is closer access to the group’s human capital facilitates employee relocations in order to fully exploit growth opportunities. Adverse shocks affecting one unit in the organisation increase workers’ mobility to other units in the group rather than to external firms, with stricter employment protection causing an additional increase in internal mobility. Overall, ILMs provide an insurance mechanism between firms in a group, allowing such organisations to bypass hiring and firing frictions; they provide job stability to employees as a by-product.

Speaker bio

Giacinta Cestone is Associate Professor of Finance at Cass Business School. She has previously held research and teaching positions at Queen Mary, University of London, the University of Salerno, and the Institute for Economic Analysis in Barcelona. Giacinta is a member of the Economic Advisory Group on Competition Policy at the European Commission, and a research associate of the European Corporate Governance Institute. She teaches courses in Corporate Finance for executive MBAs, MSc and PhD students.

Her research interests are in the areas of corporate finance and industrial organisation. Her recent work deals with the interaction between finance and product market competition, and the functioning of internal capital and labour markets within diversified groups. She has published in the Journal of Financial Economics, the Review of Finance, the Journal of Finance, the Rand Journal of Economics, and the Journal of Economics and Management Strategy. She holds a PhD in Economics from the University of Toulouse.