Labor Investment Efficiency Research Articles

Media Attention and Labor Investment Efficiency*

Media Attention and Labor Investment Efficiency*

Does corporate digitalization promote labor investment efficiency? Evidence from Chinese listed companies

This study examines whether and how corporate digitalization affects labor investment practices. Using a sample of Chinese listed companies from 2007 to 2023, we find that corporate digital development is positively associated with labor investment efficiency. Mechanism tests show that corporate digitalization can facilitate precise judgment of labor input scales, accelerate employment adjustment responsiveness, recruit high-quality potential workforce, and improve management oversight, thus contributing to making efficient labor investment decisions. Cross-sectional tests indicate that the positive impact of corporate digital development is more prominent for firms located in regions with stronger labor protection systems, industries with higher competition levels and those non-state-owned enterprises. Moreover, corporate digitalization can curb both over- and underinvestment in labor resources, and this effect is primarily manifested in firm’s hiring practices. Our findings contribute to the literature on the determinants of corporate labor investment efficiency and provide practice insight into the role of corporate digitalization in firm’s decision-making.

Growing pains: geographic expansion and labor investment efficiency

Growing pains: geographic expansion and labor investment efficiency

Labor protection and corporate labor investment efficiency - Evidence based on the implementation of the "Labor Contract Law"

This research examines non-financial companies listed in China's capital market, using the “Labor Contract Law” as a natural experiment to explore how labor protection influences investment efficiency. The study provides insights into how such policies shape corporate investment behavior. Findings indicate that stronger labor protection significantly improves labor investment efficiency and the allocation of labor resources within companies. Furthermore, the positive impact on investment efficiency is more pronounced in smaller firms and non-state-owned enterprises.

Automating efficiency: The impact of industrial robots on labor investment in China

This study examines the impact of industrial robot applications on labor investment efficiency. While previous studies have mainly focused on how industrial robots affect productivity, economic structures, and labor markets, their influence on labor investment efficiency has remained relatively underexplored. Using data from Chinese manufacturing firms, our results demonstrate that the adoption of industrial robots significantly improves labor investment efficiency. This improvement is mainly achieved by optimizing the human capital structure and enhancing capital deepening. We also find that this effect is more pronounced in non-state-owned enterprises, in environments with reduced information asymmetry, and in firms with low R&D investment and labor intensity. Overall, our results highlight the positive effect of industrial robot applications on the efficiency of corporate labor investments from a microeconomic perspective, providing important insights for labor investment decisions and resource allocation optimization.

The bright side of staggered boards: Evidence from labor investment efficiency

Using U.S. data from 1983 to 2015, we document that firms with staggered boards exhibit greater labor investment efficiency, measured as less abnormal net hiring, including over-investment (over-hiring and under-firing) and under-investment (under-hiring). A path analysis shows that 8.3% of the total effect of staggered boards on labor investment efficiency is explained by the positive effect of staggered boards on institutional ownership. Overall, our results support the view that staggered boards strengthen managers’ commitment to long-term shareholders’ interests, thereby encouraging managerial efforts to boost labor investment efficiency.

Perks and labor investment efficiency: Evidence from China

This study investigates the effect of perks on future labor investment efficiency. Agency theory suggests that perks motivate managers to distort investments for personal gain. By contrast, incentive contract theory suggests that perks can be a component of incentive contracts, encouraging managers to make investments in the best interest of shareholders. Based on a sample of 12,818 firm–year observations from 2009 to 2017, we find that perks are positively related to future labor investment inefficiencies, consistent with agency theory. An exogenous reduction in executive perks caused by the 2012 anti-corruption campaign decreases labor investment inefficiencies. Further analyses show that the positive effect of perks on overinvestment predominantly occurs when firms have excessive free cash flow, low political visibility, and a less-educated workforce, whereas the positive relationship between perks and underinvestment is more prevalent. Finally, we find that perks and labor investment inefficiencies are detrimental to firm value.

Labor investment inefficiency and LGBTQ+-friendliness

We study the effect of firms' LGBTQ+ friendliness on their labor investment efficiency and find that an improvement in firms' LGBTQ+ friendliness leads to greater labor investment inefficiencies, and that more LGBTQ+ friendly firms tend to underinvest in labor. However, we show that this relationship diminishes over time as societal and legal support for LGBTQ+ equal rights increases. A variety of firm and societal characteristics moderate the negative link between corporate LGBTQ+ friendliness and labor investment efficiency.

CEO-employee pay ratio and labor investment efficiency

This paper investigates the impact of CEO-to-median employee pay ratios on labor investment efficiency. Drawing on competing predictions from Talent Assignment Theory and Equity Theory, we examine how pay disparity between CEOs and average workers influences suboptimal investment in labor (labeled inefficient investment in labor). Our analysis finds a significant negative relationship between pay ratios and inefficient investment in labor, suggesting firms with higher CEO compensation exhibit more balanced labor investments. This challenges Equity Theory, which hypothesizes that large intra-firm pay gaps cause perceived unfairness and under-investment in labor. Overall, the study provides novel evidence on how CEO pay practices shape employee behaviors and factor inputs. The findings contribute to ongoing debates regarding the economic implications of CEO compensation, particularly in optimizing human capital efficiency.

How does climate regulatory risk influence labor employment decisions? Evidence from a quasi-natural experiment

We exploit a green lending mandate as a quasi-natural experiment and estimate its effect on labor investment inefficiency of firms with high carbon risk. We document that heightened climate regulatory risk through mandatory green lending requirements motivates firms with higher carbon risk to adjust their labor investments to levels supported by economic fundamentals. We especially show that climate regulatory risk lowers labor investment inefficiency by curbing overinvestment in labor. This impact is more concentrated among firms that are more dependent on banks for liquidity, firms with severe financial constraints, and those with more institutional investors. After the green credit policy, we also observe an increase in bank lending costs and a reduction in loan maturities for carbon-intensive firms. Overall, our findings suggest that climate bank lending regulation is one of the major channels through which climate risks get embedded in labor employment decisions. In particular, green lending regulatory costs can have significant effects on corporate labor investment efficiency.

Tax Governance and Corporate Labor Investment Efficiency: A Quasi‐Natural Experiment From China

Tax Governance and Corporate Labor Investment Efficiency: A Quasi‐Natural Experiment From China

ESG Performance, Economic Policy Uncertainty, and Labor Investment Efficiency

ESG Performance, Economic Policy Uncertainty, and Labor Investment Efficiency

Strategic alliance, agency problems, and labor investment efficiency

Inter-firm strategic alliances, which are formed to facilitate resource allocation and improve efficiency, may also inadvertently lead to labor investment inefficiencies due to increased agency conflicts and managerial opportunism. Using a sample of Chinese firms, we find that strategic alliances significantly reduce labor investment efficiency by 4.5%. The reduction in labor investment efficiency takes the form of reduced revenue-generating capacity per unit of labor, overhiring of labor, and increased labor cost stickiness. Consistent with the agency view, we find that the negative effects of strategic alliances are more pronounced under weak corporate governance and high information asymmetry among alliance partners. Overall, the results highlight the complex dynamics of inter-firm strategic alliances and provide practical insights for improving labor investment efficiency in the context of inter-firm cooperation.

The Impact of Corporate Social Responsibility on Labor Investment Efficiency: Evidence from China

This study examines the impact of corporate social responsibility (CSR) on labor investment efficiency utilizing a sample of China’s listed companies. The empirical results demonstrate that CSR improves labor investment efficiency, and the effect is significant in terms of both overinvestment and underinvestment. Findings from cross-sectional tests indicate that CSR has a more significant effect on labor investment efficiency in non-state-owned firms and firms with more financing constraints or higher labor adjustment costs. The conclusion is robust after utilizing a 2SLS regression, replacing indicators for labor investment efficiency and accounting for the impact of non-labor investment. In general, the results support stakeholder theory and confirm that CSR can enhance external monitoring and improve firms’ investment behavior.

Corporate social responsibility and labor investment efficiency: evidence from China

PurposeWe 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/approachThis 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.FindingsResults 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/valueIn 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.

Foreign institutional ownership and corporate labor investment

AbstractWe examine the impact of foreign institutional ownership on firms' labor investment efficiency. Using a comprehensive global sample of firms across 37 non‐U.S. countries, we find that greater ownership by foreign institutional investors is significantly associated with lower deviations of labor investment from the level justified by economic fundamentals, that is, higher labor investment efficiency. Independent, U.S.‐based and common‐law foreign institutional investors increase labor investment efficiency to a greater extent than their gray, non‐U.S.‐based and civil‐law peers. We further find evidence supporting the value creation of foreign institutions through the improvement in labor investment efficiency. Overall, our results suggest that foreign institutional investors promote good corporate governance practices around the world.

기업의 ESG 수준이 노동투자효율성에 미치는 영향

[Purpose] This study analyzed the relationship between ESG and labor investment efficiency. Recently, as companies’ interest in ESG management has increased in each field, a number of studies on investment efficiency have been conducted. However, research related to labor investment is insufficient. In addition, there are conflicting hypotheses about investment efficiency, so the need for research emerges.
 [Methodology] From 2011 to 2020, 5,277 companies settled in corporations (excluding the financial industry) were analyzed. The ESG score was designated as a real number from 1 to 6, and the relationship between ESG and labor investment efficiency was empirically analyzed using Pinnuck and Lillis (2007)’s labor investment inefficiency research model.
 [Findings] It was found that there was a significant negative (－) result between the ESG level of a company and labor investment inefficiency. Among them, environmental and social scores did not significantly affect labor investment inefficiency, and only governance scores significantly reduced labor investment inefficiency.
 [Implications] This study is expected to use the ESG level of a company as useful information for investment decision－making when considering the labor investment factors of a company.

U.S. Political corruption and labor investment (in)efficiency

This study examines the impact of political corruption on firm labor investment efficiency. We find that firms headquartered in areas with higher levels of corruption have more inefficient levels of labor investment. Firms in more corrupt environments have weaker monitoring brought about by information opacity as well as a need to shield their assets, which prompts them to adopt inefficient labor investment policies. These results are robust to considerations of omitted variable bias, selection bias, and other endogeneity concerns. The present research has broad implications for society, particularly employees, as it shows that political corruption causes firms to deviate from optimal labor investment decisions.

Threat or opportunity? Unveiling the impact of population aging on corporate labor investment efficiency

This study examines the impact of population aging on labor investment efficiency in Chinese listed firms from 2009 to 2020. Our main findings reveal that aging can positively influence labor investment efficiency, particularly in firms with labor redundancies such as state-owned enterprises, those with labor unions, high labor costs, and financial constraints. The positive effect is lessened in regions with abundant human capital, within the manufacturing sector, and labor-intensive industries. The results show that improvements in labor efficiency are distinct from changes in capital investment efficiency, indicating no general rebalancing of resources due to demographic shifts. Firms with limited investment opportunities and under strict external monitoring benefit more from an aging workforce. Overall, our findings suggest that an aging population can offer opportunities for firms to enhance labor investment efficiency, challenging the conventional view of population aging as solely a threat.

Customer Concentration and Labor Investment Efficiency: Evidence from China

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.