Graduation Year

2026

Date of Submission

12-2025

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

Joshua Rosett

Abstract

This thesis examines whether firms with greater reliance on labor face higher systematic risk. I construct three measures of labor leverage and test their relationship with firm-level market betas. Using annual COMPUSTAT data merged with daily CRSP returns from 2000-2024, I estimate cross-sectional regressions that relate each measure to beta while controlling for size, valuation, leverage, profitability, and capital intensity. Descriptive patterns show that firms with higher labor commitments generally have higher betas. In the regression analysis, labor share is the only measure that exhibits a statistically significant positive association with systematic risk. The present-value measure and labor-intensity proxy move in the expected direction but are not significant after controls are included, and robustness checks confirm these results. Overall, the evidence suggests that the cost structure of labor, rather than the duration or scale of labor commitments, is the most informative labor-related component of systematic risk.

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This thesis is restricted to the Claremont Colleges current faculty, students, and staff.

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