Financial Implications of the Decision to Increase Reliance on Contingent Labor*

This paper provides the first systematic examination of the financial implications associated with increased reliance on contingent (i.e., temporary/part‐time) labor. Using measures of performance from income statement and balance sheet data, and stock returns, we find that the adoption of this labor practice is associated with superior subsequent performance. Concurrently, no increase in systematic risk and standard deviation of stock returns is observed. The increase in performance with no concurrent increase in systematic risk and standard deviation of returns perhaps explains the increasing popularity of this labor practice.