What role do limited partnership agreements play in labor investment efficiency? Evidence from Chinese markets

PurposeThe purpose of this paper is to empirically investigate the impact of economic policy uncertainty on firms' labor investment decision, which includes labor investment level and efficiency, especially human capital allocation.Design/methodology/approachThis paper uses Economic Policy Uncertainty Index for China and Chinese A-share listed firms in the period 2002–2016 to constructs a sample of 20,779 firm-year observations and applies the methods of pooled OLS regressions to do an empirical study.FindingsThis paper finds that firms' labor investment is negatively correlated with economic policy uncertainty. And firms' labor investment efficiency (and overinvestment in labor) is positively (negatively) correlated with economic policy uncertainty, which is more significant for non-SOEs and firms with less government intervention. Further, the positive relation between economic policy uncertainty and labor investment efficiency is more significant for labor-intensive firms, firms in competitive industry, firms in developed labor market and firms under strong labor law protection. In addition, economic policy uncertainty induces firms to make adjustment on human capital structure and allocate more employees with high human capital, which eventually helps firms achieve higher total factor productivity.Social implicationsThe study of this paper indicates that the government needs to consider economic policies' impact on firms when introducing and changing policies and guide firms to improve human capital allocation under different internal and external conditions to finally realize the optimal allocation of social resources.Originality/valueThis paper studies the influence of external economic policy environment on firms' labor investment decision, which lacks adequate attention in the literature and indicates that under economic policy uncertainty, firms actively decrease labor demand and increase labor investment efficiency by optimizing human capital allocation.

In the context of China’s economic development having entered the new normal, it has become an important task to improve the efficiency of enterprise human capital allocation to deepen the supply-side structural reform. However, existing literature focuses on firms’ capital investment efficiency but ignores the labor investment efficiency. Moreover, early literature mainly studies the excessive employment in state-owned enterprise due to government intervention and the distortion of enterprise operation and management activities due to the strengthening of labor protection in Labor Contract Law of 2008. But improving firms’ labor investment efficiency fundamentally depends on the market playing a decisive role in resource allocation. As an innovation of the capital market trading system, the margin trading and short selling system implemented in China in 2010 is increasingly playing the role of market price discovery for the increase of stock price information content and corporate governance for the improvement of financial reporting quality, which will undoubtedly significantly promote firms to optimize the allocation of human capital and improve the labor investment efficiency. Therefore, this paper studies the impact of short selling on firms’ labor investment efficiency. We find that firms’ labor investment efficiency improves after the relaxation of short selling constraint. And this phenomenon is more significant for firms with low stock price informativeness or financial reporting quality. Further, there is an asymmetry for the improved labor investment efficiency, that is, only firms’ labor under-investment not labor over-investment is reduced. This asymmetry results from Labor Contract Law, which increases labor protection and makes it difficult to fire employees and reduce labor investment to achieve the optimal level justified by economic fundamentals. And short selling reduces labor under-investment by releasing financial constraint and managerial slack. In addition, short selling helps these under-investment firms allocate more employees with high human capital and eventually achieve higher total factor productivity. Overall, these findings not only enrich the research in the fields of enterprise investment decision, the influencing factors of labor investment efficiency, and the economic consequences of short selling, but also have important implications on how to give full play to the decisive role of market mechanism innovation in the allocation of labor resources, so as to enhance total factor productivity and promote sustained and healthy economic and social development in the current supply-side structural reform.

Purpose We expect to provide a complete theoretical framework and large sample evidence on the impact of corporate social responsibility (CSR) on the efficiency of labor investment. We also hope to provide micro-evidence based on labor investment behavior for the two-sided impact of corporate CSR behavior. Design/methodology/approach This paper measures labor investment efficiency by estimating the difference between actual and expected net hiring of enterprises. CSR is measured on the basis of the CSR score of Chinese listed companies published by Hexun.com. A regression model is constructed to analyze the relationship between CSR and labor investment efficiency. Possible endogeneity problems are controlled by lagging independent variables, propensity score matching method and difference-in-difference method. Findings Results show that CSR can improve labor investment efficiency by reducing over-hiring and under-hiring in emerging markets. The existence of the mediating effect of agency cost, information disclosure quality and employment fluctuation confirms that CSR improves labor investment efficiency through two mechanisms of corporate governance and labor market friction. The improvement effect of CSR on labor investment efficiency is more significant in non-state-owned, high CEO shareholding ratio and high-average urban wage enterprises. Originality/value In conclusion, our study is an important supplement to the existing research on the factors affecting labor investment efficiency. Our research conclusions will be helpful for enterprises in developing countries or enterprises in labor-intensive industries to improve labor investment inefficiency. The conclusion of the mechanism analysis in this paper provides more complete and reliable microscopic evidence for accurately identifying the specific path of CSR's impact on labor investment efficiency. This paper verifies the positive impact of CSR from the perspective of labor investment efficiency in the context of a developing country, which provides evidence for the theoretical conflicts related to CSR based on the effectiveness of enterprise labor investment decisions.

Does executives’ overseas experience improve firms’ labor investment efficiency?

Objective: One of the most important decisions of companies which have important economic consequences in the long run, both for the country and company, is decisions related to efficiency of investment in labor. Accordingly, in this study, the role of one of the key features of accounting information quality (accounting comparability) on labor investment efficiency in companies was investigated. In the meantime, the moderating role of features including financing constraint, internal and external oversight studied. Method: For statistical analysis, data from 91 firms listed on Tehran Stock Exchange from 2010 to 2020 was used. Results: The results of regression analysis of the study showed that accounting comparability has positive effects on the labor investment efficiency. Evidence also shows that when firms have financing constraint, and weak internal and external oversight a stronger positive relationship between accounting comparability and labor investment efficiency exists. Conclusion: Standard setters can improve the efficiency of investing in labor by adopting ways to improve the comparability of companies' information. Also, in situations where internal and external oversight are not in a good position, the labor investment efficiency can be improved by providing comparable accounting information. Objective: One of the most important decisions of companies which have important economic consequences in the long run, both for the country and company, is decisions related to efficiency of investment in labor. Accordingly, in this study, the role of one of the key features of accounting information quality (accounting comparability) on labor investment efficiency in companies was investigated. In the meantime, the moderating role of features including financing constraint, internal and external oversight studied. Method: For statistical analysis, data from 91 firms listed on Tehran Stock Exchange from 2010 to 2020 was used. Results: The results of regression analysis of the study showed that accounting comparability has positive effects on the labor investment efficiency. Evidence also shows that when firms have financing constraint, and weak internal and external oversight a stronger positive relationship between accounting comparability and labor investment efficiency exists. Conclusion: Standard setters can improve the efficiency of investing in labor by adopting ways to improve the comparability of companies' information. Also, in situations where internal and external oversight are not in a good position, the labor investment efficiency can be improved by providing comparable accounting information.

This paper examines the effect of foreign ownership on firms’ labor investment efficiency, which is an essential factor for the firms’ long-term operating performance. Further, this paper examines whether foreign ownership alleviates over or under investment in labor, focusing on the Korean stock market. Using Korean listed 22,924 firm/year observations from 1997 to 2019, we estimate abnormal net hiring by using the abnormal portion of net hiring for each firm/year observations. The empirical results suggest that foreign ownership is negatively associated with the absolute value of abnormal net hiring, which indicates that foreign ownership enhances firms’ labor investment efficiency. Additional analyses suggest that foreign ownership alleviates over and underinvestment in labor in the Korean stock market. Further analyses suggest that foreign ownership’s monitoring effect toward labor investment efficiency enhances sustainability operating performance. Robustness tests, including firm-fixed effects and two-stage least squares estimation, supports our main results. There is an ongoing debate on whether foreign ownership’ active monitoring role in developing countries. Foreign ownership conducts an active monitoring role in developing countries regarding labor investment. Thus, our results suggest that foreign ownership may be an one of determinant of enhancing firms’ labor investment efficiency in Korean stock marekt.

This study examined the effect of corporate governance on labor investment efficiency, using 5178 firm-year samples from companies listed on the Korean stock market over the period from 2011 to 2019. In addition, the relationship between corporate governance and labor investment efficiency according to whether the company belongs to a chaebol group was examined. Corporate governance was measured using KCGS’s corporate governance ratings. This study tried to verify whether labor investment inefficiency due to information asymmetry is improved by excellent corporate governance. The results show that in the case of the entire sample, the relationship between corporate governance and labor investment efficiency was significant in the positive (+) direction. That is, it is an empirical result indicating that a company with a sound governance structure is making effective labor investment. The samples were divided into overinvestment samples and underinvestment samples, and the relationship between corporate governance and labor investment efficiency was analyzed separately in the two samples. According to the results, the positive relationship between corporate governance and labor investment efficiency was significant only in the case of underinvestment samples. In addition, the positive relationship between corporate governance and labor investment efficiency was more statistically significant in the case of companies belonging to a chaebol group. This study provided implications for authorities, shareholders, and investors, etc., in that it suggests the role of corporate governance as a mechanism to alleviate the agency problem between managers and investors.

Board gender diversity and corporate labor investment efficiency

ABSTRACT: The labor force constitutes a paramount factor of production in the realm of business operations. In the past, China's abundant labor force significantly boosted productivity for firms. However, as the demographic dividend gradually wanes, concerns have arisen regarding a scarcity of labor force, exacerbating worries about rising labor costs. Therefore, focusing on enhancing firms' labor investment efficiency becomes pivotal. Using a sample of A-stock listed firms in China from 2013 to 2020, we examine the impact of customer concentration on the labor investment efficiency of supplier firms. Prior literature provides mixed results regarding the effect of concentrated customers. They can act as a governance mechanism for reducing agency problems, thus, increasing investment efficiency. Conversely, agency problems are aggravated in suppliers with concentrated customers, consequently, reducing investment efficiency. Our results suggest that customer concentration reduces labor investment efficiency, and this effect is more pronounced when customers possess high bargaining power. Additionally, the mechanism analysis reveal that customer concentration leads to less accurate information disclosure, higher operating risk, and an incentive to "empire building", reducing labor investment efficiency. The cross-sectional analysis reveals that customer concentration results in both over- and under-investment in labor, thereby reducing investment efficiency. In addition, we employ augmented models to rule out the possibility of a U-shaped relationship between customer concentration and labor investment efficiency. Furthermore, we adopt the instrumental variables approach as well as a two-stage regression model to address potential endogeneity concerns and mitigate the omitted variable concern. Our results hold after the robustness tests and endogeneity tests. The findings of this paper imply that firms should strategically diversify their customer bases, thereby reducing their reliance on a few large customers. Simultaneously, governments should actively encourage firms to broaden their customer base. It can help enhance labor investment efficiency by spreading the risks associated with customer concentration. Moreover, it is crucial to acknowledge that substantial customer bargaining power can negatively impact supplier firms. Thus, policymakers should promote antitrust regulations and fair trade practices to mitigate the high bargaining power of large customers.

This paper studies how analysts’ group affiliation affects firms’ labor investment efficiency. Using a 2001–2017 sample of Korean public companies, we find that labor investment efficiency increases when there are more unaffiliated analysts following business group (chaebol) firms. Our regression results also suggest that an increase in labor investment efficiency is attributed to a reduction in firms’ over-firing problem. However, affiliated analysts are not found to influence firms’ labor investment efficiency. We further document that the positive influence of unaffiliated analysts on labor investment efficiency holds when firms have high cash holdings. Our results are robust to different model specifications, including two-stage least square regression and firm-size matching.

Research Question/IssueThis study investigates whether and how board reforms affect labor investment efficiency using a difference‐in‐differences analysis of board reforms in 41 countries worldwide as an exogenous shock.Research Findings/InsightsBoard reforms are positively associated with labor investment efficiency because they benefit firms in reducing over‐hiring, under‐firing, under‐hiring, and over‐firing. Further, we show that the positive effect is more pronounced among firms with lower board independence before the reforms, firms with high institutional foreign ownership, firms with higher corporate social responsibility (CSR), and labor‐intensive firms. While countries with rule‐based reforms experience a greater reduction in abnormal net hiring post‐reform, the effects of reforms are similar across civil and common law countries. Further analyses reveal that in countries with higher employment protection legislation, the beneficial relationship between board reforms and labor investment efficiency is weaker.Theoretical/Academic ImplicationsOur study suggests that one of the mechanisms linking board reforms and labor investment efficiency is a reduction in frictions, such as moral hazard and adverse selection, which hamper efficient labor investment. To the best of our knowledge, this is the first international study that explores globally the relationship between board reforms and firm labor policies, in particular, labor investment efficiency.Practitioner/Policy ImplicationsGiven the importance of identifying and confirming the role of corporate governance in human capital investment efficiency, our empirical investigation provides useful insights and policy implications for managers in building efficient labor policies.

T HE cyclical behavior of labor markets reveals a number of puzzling features for which there are no truly satisfying explanations. Included among these are (1) occupational differences in the stability of employment and earnings, (2) the uneven incidence of unemployment, (3) the persistence of differential labor turnover rates, and (4) discriminatory hiring and firing policies. I believe that the major impediment to rational explanations for these phenomena lies in the classical treatment of labor as a purely variable factor. In this paper I propose a short-run theory of employment which rests on the premise that labor is a quasi-fixed factor. The fixed employment costs arise from investments by firms in hiring and training activities. The theory of labor as a quasi-fixed factor is developed in Part I. In Part II, the implications of this theory are subjected to various empirical tests. Finally, Part III turns to an examination of alternative theories and an extension of my theory to a theory of occupational wage differentials. The concept of labor as a quasi-fixed factor is, in my opinion, the relevant one for a short-run theory of employment. Its implications are amenable to empirical verification and are, in the main,

Cross-listing dynamics and labor investment efficiency: International evidence

Labor capital plays a critical role in shaping enterprise competitiveness and in the allocation of macroeconomic resources, while the prominent of carbon risk significantly influences corporate labor allocation patterns. In this paper, utilizing data sampled from China’s A-share listed companies between 2012 and 2021, the impact and mechanism of corporate carbon risk on labor investment efficiency have been examined. The results reveal that carbon risk significantly inhibits labor investment efficiency. Moreover, environmental uncertainty, agency problems, and managerial ability are the primary channels through which carbon risk can affect corporate labor investment efficiency. Additional tests reveal that the impact of carbon risk on labor investment efficiency is more pronounced in firms with lower competitive positions and more severe financing constraints. The detrimental effect of carbon risk on labor investment efficiency is particularly evident in firms characterized by labor underinvestment, high labor intensity, high pollution, and non-high-tech industries. The findings of this study can provide valuable insights for policymakers to improve carbon risk management, enhance labor investment efficiency, and optimize the institutional mechanisms for factor market allocation.

Purpose This study investigates the relationship between employee support and labor investment efficiency, examining the mediating role of internal control weaknesses. The research integrates human capital theory and agency theory to provide a more comprehensive understanding of how employee Support policies affect workforce management efficiency. Design/methodology/approach Using a sample of 1,790 firm-year observations spanning from 2014 to 2023, the study employs regression analysis with panel data. Findings The results reveal that employee support significantly improves labor investment efficiency both directly and indirectly. Companies with stronger employee support demonstrate fewer internal control weaknesses, which in turn leads to more efficient labor investment decisions. The study finds that internal control weaknesses partially mediate the relationship between employee support and labor investment efficiency. Originality/value This study makes a novel contribution by examining the mediating role of internal controls in the relationship between employee support and labor investment efficiency, an aspect previously unexplored in the literature. By integrating multiple theoretical perspectives and investigating both direct and indirect effects, the research provides new insights into how organizations can optimize their human capital management through the complementary interaction of supportive policies and control mechanisms.