Labor Investment Efficiency Research Articles

Carbon emission trading scheme and corporate labor investment efficiency: evidence from China.

Under the dual pressure of environment and employment, it has been a hot topic whether government departments can achieve the double dividend of "environmental improvement" and "employment promotion" via reasonable market-based environmental regulation. In light of the exogenous policy event of the carbon emission trading scheme (ETS), this study investigates the impact of ETS on the corporate labor investment efficiency of a sample of industrial companies listed in China's A-share from 2007 to 2020. The study reveals that the ETS can significantly improve corporate labor investment efficiency. Further research finds that the promotion of green technology innovation and alleviation of financing constraints as crucial mechanisms by which ETS affects corporate labor investment efficiency; the ETS improves the corporate labor investment efficiency more significantly in enterprises with a lower marketization degree, lower labor intensity, and non-state-owned enterprises. The improvement of labor investment efficiency by the ETS is associated with the amelioration of labor under-investment and suppression of over-investment. Furthermore, the improvement of labor investment efficiency by the ETS can enhance enterprises' productivity. In light of these findings, this study provides suggestions for the improvement of ETS from the microscopic perspective of firms and offers ideas for the improvement of corporate labor investment efficiency.

Urban Shrinkage and Labor Investment Efficiency: Evidence from China

In the context of unsustainable urban growth patterns and employment difficulties, we examine the impact of urban shrinkage on labor investment efficiency by drawing on the idea of the difference-in-difference model. Using a sample of Chinese firms from 2010 to 2019, our findings suggest that the widespread occurrence of urban shrinkage in China was responsible for a significant portion of the excessive labor investment in most listed companies. These results are robust to alternative specifications. In addition, we further found heterogeneity in the impact of urban shrinkage on labor investment efficiency. For state-owned or mature listed companies, this impact is manifested as the promotion of employment redundancy, while for non-state-owned or young companies, the impact is reflected in alleviating insufficient employment. Thus, we creatively identify a potential channel through which imbalanced development between cities affects corporate and economic sustainability.

How does employment protection legislation affect labor investment inefficiencies?

This paper analyzes how labor investment decisions are affected by the operational risk related to different dimensions of employment legislation (general, regular, and temporary employment protection). Labor investment efficiency is usually described as efficient investing and resource management; employment protection legislation can be regarded as an obstacle that increases hiring and firing costs, representing a source of operational risk and leading to lower output and financial flexibility. This study uses data from 612 companies from 30 countries between 2011 and 2019 (4044 observations) and a dynamic panel data estimator to investigate the relationship between employment protection legislation and labor investment inefficiencies. Our results show that general employment protection legislation reduces inefficiencies, whereas regular and temporary specific employment protection laws increase the incentive to overinvest. Our findings can be explained by the agency theory and the ways in which different aspects of employment protection legislation create operational risk.

The Mediating Effect of Labor Investment Efficiency on the Relationship between ESOP and Cost of Equity

The Mediating Effect of Labor Investment Efficiency on the Relationship between ESOP and Cost of Equity

The effect of labor investment efficiency on investor attention--Evidence from Chinese listed companies

The effect of labor investment efficiency on investor attention--Evidence from Chinese listed companies

Cross-listing dynamics and labor investment efficiency: International evidence

This paper investigates the dynamics of cross-listing in the United States and labor investment efficiency. Using a sample of 11,780 firm-year observations from 44 countries over the period 2000–2019, we found that cross-listing is positively associated with labor investment efficiency. This result suggests that cross-listing is associated with lower deviations in labor investment at the level explained by economic fundamentals. We also found that cross-listing reduces both overinvestment and underinvestment problems. The positive impact of cross-listing on labor investment efficiency is more prevalent for firms from countries with weaker institutions and higher liabilities due to foreignness and for those operating in industries with low litigation risk. Further evidence shows that labor investment efficiency following cross-listing in the United States translates into high firm valuation. Our findings are robust to endogeneity concerns and have important policy implications.

Political connections and labor investment efficiency: Evidence from China's private firms

AbstractThis study investigates whether political connections affect labor investment efficiency. We test this question in the context of China's private firms, where we find that political connections are negatively associated with labor investment efficiency. We also explore the channels through which political connections reduce labor investment efficiency and provide evidence that political connections aggravate both agency problems and information asymmetry. Further tests show that the influence of political connections is more pronounced for firms with overinvestment problems or high‐level political connections, and for firms from regions facing severe unemployment or loose anticorruption. Overall, our results are consistent with the “grabbing hand” argument that politicians destroy firm operational efficiency.

Assessing the impact of corporate environmental performance on efficiency improvement in labor investment

AbstractEnvironmental, social, and governance (ESG) factors have become increasingly important to employees and companies alike. It is important to integrate ESG considerations into labor investment decisions. We examine the impact of ESG performance on firms' labor investment efficiency. Using data from A‐share listed firms from 2015 to 2020, we find that ESG performance improves labor investment efficiency. Such positive effect is robust after using alternative measures for labor investment efficiency and ESG performance, alternative regression specifications, and a bunch of endogeneity tests. The mechanism tests show that a strong ESG record can reduce financial constraints and improve the information environment, thus subsequently boosting the efficiency of labor investment. The findings of the study shed light on efficiency improvement in labor investment for management, regulatory authority, and environmental activists.

Economic growth and labor investment efficiency

AbstractWe examine the relationship between economic growth and labor investment efficiency. Using a sample of US firms from 1991 to 2019, our findings suggest that labor investment inefficiency increases with the expansion of economic activities. Although economic growth increases labor overinvestment, it also decreases labor underinvestment. The magnitude effect of economic growth is more pronounced for labor overinvestment. Labor investment inefficiency is noticeable during low economic policy uncertainty. Economic growth‐induced labor investment inefficiency is pronounced for (1) large firms, (2) high labor intensity firms, and (3) firms with overinvestment in non‐labor investments. Further, economic growth negatively (positively) influences the firm's future performance for labor overinvested (underinvested) firms. Our findings remain robust to alternative specifications.

Bank Competition and Firm Labor Investment Efficiency: Evidence from China

ABSTRACT This study examines the impacts of bank competition on firms’ labor investment efficiency. Using geographic location data of commercial bank branches in China, we find that the firms located within more bank branches, namely facing greater bank competition, have higher labor investment efficiency. The possible explanation behind this effect is that the rising bank competition intensity leads to increases in firms’ loans from local banks and decreases in their financial constraints, which improve firms’ labor investment efficiency. Our findings are more pronounced in non-state-owned firms, small firms, and firms with low cash ratios. We provide timely policy implications for central regulators concerned with the consequences of banking deregulation on firms’ labor investment performance.

Media Coverage and Labor Investment Efficiency: Evidence from China*

AbstractUsing 2.09 million pieces of media coverage associated with Chinese firms during 2006–2019, we find a significantly positive relationship between media coverage and labor investment efficiency. Both newspaper and online media coverage can effectively reduce firms' labor over‐investment and under‐investment. Our results are robust after addressing a range of endogeneity concerns. Further analyses show that the positive relationship between media coverage and labor investment efficiency is more pronounced for firms with higher labor cost stickiness or when human capital is more important to the firm's business model. Mechanism analyses reveal that media coverage improves labor investment efficiency through the compensation incentive mechanism, supervision mechanism, and information disclosure mechanism.

Labor substitutability and corporate labor investment: Evidence from the H-1B program

The H-1B program which allows skilled foreign-born individuals to work temporarily in the United States is imperative for corporate employment, yet there is no empirical evidence on how it relates to labor investment efficiency. We examine this relationship and find that an increase in the chance of an H-1B lottery approval is positively associated with an increase in labor investment efficiency. We also provide evidence that the growth in the domestic labor wage dampens the positive effect of the H-1B program on labor investment efficiency. Our study is robust to alternative measures, and estimation techniques, and helps sheds light on the relevance of the H-1B program on corporate hiring decisions.

The U.S. Individualism-Collectivism and Labor Investment Efficiency

The U.S. Individualism-Collectivism and Labor Investment Efficiency

Government Contracts and Labor Investment Efficiency

Government Contracts and Labor Investment Efficiency

Labor Investment Efficiency and CEO Tenure

Labor Investment Efficiency and CEO Tenure

Antitrust and LIE: The Impact of Competition on International Labor Investment Efficiency

Antitrust and LIE: The Impact of Competition on International Labor Investment Efficiency

High-speed rail construction and labor investment efficiency: Evidence from an emerging market

This study investigates the association between high-speed rail (HSR) construction and labor investment efficiency. Using unique hand-collected data on HSR construction over the period 2008–2019, we find that HSR construction can significantly decrease inefficient labor investment in China. In addition, we find that this negative relationship is (a) strong in state-owned companies and in firms located in big cities and (b) weak in financially constrained firms and in firms located in areas with a strong religious atmosphere. Consistent with the theoretical prediction, we find that the HSR construction mitigates inefficient labor investment by reducing information asymmetry between managers and investors and enhancing labor mobility. Overall, our findings are robust to alternative measurements, additional controls, fixed effects, and endogeneity concerns. Our findings have implications for firms’ top management to make strategic decisions and for government’s bodies/policymakers in relevance to HSR investment decisions.

Government Intervention and Labor Investment Efficiency: Evidence from China’s Industrial Policy

ABSTRACT This study examines whether government intervention via industrial policy affects labor investment efficiency. Covering two of China’s Five-Year Plans spanning 2006–2015, we find that indirect government intervention via industrial policy results in lower employee numbers and higher labor investment efficiency. The effect is stronger in state-owned enterprises (SOEs), especially in SOEs controlled by local government, and in regions with weaker market-based institutions. The effect operates through reducing over-hiring, but not reducing under-hiring, under-firing, or over-firing. Overall, our results indicate that indirect government intervention via industrial policy improves labor investment efficiency by alleviating local Chinese governments’ intervention on firms.

Oil Price uncertainty and labor investment efficiency

This study examines whether oil price uncertainty affects the efficiency of firm-level labor investments. Using a sample of 5183 US firms from 1991 to 2019, we find an inverted U-shaped relationship between oil price uncertainty and labor investment inefficiency. More specifically, firms overinvest in their human capital during the volatility of negative oil price changes. Labor overinvestment (staff overhiring) is highest at an oil price uncertainty of about 38% and decreases after that point. Our findings remain robust to several alternative specifications and are restricted to the subsamples of firms that are more likely to overinvest ex-ante, have high labor intensity, and have overinvestment in non-labor investment expenditures. These findings are relevant to managers, shareholders, and policymakers in devising strategies that demonstrate the response of corporate labor investments to oil price uncertainty.

University-industry collaboration: The impact of postdoctoral workstations on labor investment efficiency.

This paper investigates whether managers use knowledge transferred from university-industry collaboration when making investment decisions on labor. To establish causality, we use a difference-in-difference method based on the staggered establishment of postdoctoral workstations in Chinese firms. We find that postdoctoral workstations enable managers to improve labor investment efficiency and thus help mitigate over- and under-investment problems in labor, and the higher the operational quality of the workstation, the more significant the increase in investment efficiency. This finding is robust to utilizing the event study approach, placebo test, propensity score matching, instrumental variable, and entropy balancing. Brain gain and knowledge transfer effects between universities and industries are two plausible mechanisms. Furthermore, the main effect is more pronounced for firms located closer to prestigious universities, firms are non-state-owned enterprises, human-capital-intensive, have political connections, and without national fellows’ lead. Our findings suggest that brain gain in firms does not merely increase or reduce labor investments Per se, but rather inspires managers to maintain optimal labor levels through knowledge transfer processes.