Abstract
This study investigates the relation between internal information environment and labor investment efficiency. We argue that better internal information quality allows managers to obtain more timely and accurate information from subordinates and therefore make better decisions in labor investments. Our results suggest that the labor investments of firms with high quality internal information have less deviation from the optimal level. This association holds for both companies in industries with high and low union coverage.
Highlights
According to neoclassical economic theories (e.g. Cobb & Douglas, 1928), both labor and capital are input of the production function and the labor investment efficiency has a direct impact on firms’ economic outputs
We posit a positive relation between internal information quality and labor investment efficiency for three reasons
We find an association between high quality internal information and efficient labor investment
Summary
According to neoclassical economic theories (e.g. Cobb & Douglas, 1928), both labor and capital are input of the production function and the labor investment efficiency has a direct impact on firms’ economic outputs. Cobb & Douglas, 1928), both labor and capital are input of the production function and the labor investment efficiency has a direct impact on firms’ economic outputs. Consistent with this notion, management literature documents that human resource is closely associated with firm performance and firm value (Becker & Gerhart, 1996; Veltri & Silvestri, 2011). Despite the direct and important impact of labor investment on economic outputs and corporate expenditure, only a few accounting and finance studies investigate the determinants and outcomes of labor investment efficiency (e.g., Ding, Ni, & Xu, 2020; Jung, Lee, & Weber, 2014; Ghaly, Dang, & Stathopoulos, 2020; Ben-Nasr & Alshwer, 2016; Jung, Kang, Lee, & Zhou, 2020). Improvement of labor investment efficiency can potentially enhance firms’ productivity and alleviate firms’ stress from the increasing employment costs, it plays an important role in corporate performance
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