Employment protection and corporate cash holdings: Evidence from China's labor contract law

Cui, Chenyu; John, Kose; Pang, Jiaren; Wu, Haibin

doi:10.1016/j.jbankfin.2018.05.011

Cited by 96 publications

(24 citation statements)

References 53 publications

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“…Ghaly et al (2015) find that firms with better employee treatment hold more cash. In a similar vein, using a sample of Chinese companies, Cui et al (2018) find a significant positive association between employee protection and corporate cash holdings, suggesting a high willingness to protect employees and invest in employee welfare and a strong financial commitment to employees. Using a panel sample from 1992 to 2011, Chen et al (2016) find a significant and positive association between employee treatment and firm innovation performance, suggesting that improving employee satisfaction can lead to more patents.…”

Section: Employee Treatmentmentioning

confidence: 79%

“…(2015) find that firms with better employee treatment hold more cash. In a similar vein, using a sample of Chinese companies, Cui et al . (2018) find a significant positive association between employee protection and corporate cash holdings, suggesting a high willingness to protect employees and invest in employee welfare and a strong financial commitment to employees.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

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Employee treatment and discontinued operations

Leonard

Sun

2022

ARA

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PurposeThe authors investigate the relation between employee treatment and the likelihood of discontinuing business operations.Design/methodology/approachThe authors use regression analysis to investigate the relation between employee treatment and the likelihood of discontinuing business operations.FindingsThe authors find a significant negative relation between employee treatment and the likelihood of discontinuing business operations, suggesting that firms with better employee treatment are less likely to discontinue operations.Originality/valueThis study contributes to two distinctive steams of research: discontinued operations in accounting literature and employee welfare in human resources management literature.

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Section: Employee Treatmentmentioning

confidence: 79%

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Employee treatment and discontinued operations

Leonard

Sun

2022

ARA

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“…The LCL effect should be stronger for firms with more temporary workers because the law has more intense impacts on informal employment. Since firm-level temporary worker dataset is unavailable, former literature (e.g., Cui et al, 2018) use industry-level migrant worker data as a compromise. However, in our case, industry is associated with production flexibility to a great extent.…”

Section: City Of Registrationmentioning

confidence: 99%

Employment protection, production flexibility and corporate capital spending

Tian

2021

Australian Economic Papers

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Previous literature argues that labour employment protection influences corporate investment through three mechanisms. Using the Labour Contract Law (LCL) in China as an exogeneous shock, we analyse publicly listed companies with regression discontinuity design, and we find that production flexibility plays a mediating role among these mechanisms. On one hand, LCL increases the labour cost of labour-intensive firms (LIFs); on the other hand, LCL increases capital spending of non-labour-intensive firms (NLIFs). These findings are not ascribed to industry differences, are not driven by the boom of the housing market or other contemporary shocks, and are robust to alternative measures and placebo tests. We conjecture that NLIFs can flexibly replace labour with physical capital. As for LIFs, labour and capital must be maintained at a fixed ratio and thus neither labour nor capital can be readily adjusted. Cross-sectional analyses confirm our conjecture.

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“…However, other important firm stakeholders, such as employees, have received more limited attention. Still, a growing literature is developing on how employees affect firms' financial policies, including their cash holdings (e.g., Cui, John, Pang & Wu, 2018;Devos & Rahman, 2018;Klasa, Maxwell & Ortiz-Molina, 2009). 4 Unfortunately, as highlighted before, this literature focuses exclusively on publicly-traded firms.…”

Section: Hypothesesmentioning

confidence: 99%

“…These country characteristics measure macro-economic conditions, the availability of private credit, legal creditor protection and the rule of law in the country where the firm is established. We also include two dimensions of labor protection that have been found to significantly affect cash holdings of publicly-traded firms: the degree of unionization (Klasa, Maxwell & Ortiz-Molina, 2009) and the degree of legal employment protection (Cui, John, Pang & Wu, 2018). Finally, we also include industry fixed effects and, where possible, country fixed effects.…”

Section: Introductionmentioning

confidence: 99%

Unemployment insurance and cash holdings of privately held firms around the world

Deloof

Vanacker

2020

Corporate Governance

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This paper studies the relationship between country-level unemployment insurance and cash holdings of privately-held firms. When public unemployment insurance is weak, firms may provide alternative unemployment insurance by committing not to lay off workers in bad times. We hypothesize that one way firms can do so is by holding larger cash balances. Research Findings/Insights: Using a large sample covering 388,940 private firms from 32 countries around the world over the 2007-2014 period, we find a negative relationship between public unemployment insurance and cash holdings. This effect is driven by countries where public unemployment insurance is weak or non-existent. We also find that privately-held firms keep a larger part of their new debt issues as cash when public unemployment insurance is weak. Theoretical/Academic Implications: We contribute to a growing literature on an institutionbased view of comparative corporate governance. We show that national governance factors and, more specifically, public unemployment insurance, which protects employees (an important but relatively ignored stakeholder), influences firm cash holdings in a private firm context. Practitioner/Policy Implications: Our findings have important implications for policy design. Specifically, they suggest that labor market institutions designed to support employees can also indirectly benefit their employers because these institutions allow firms to reduce the opportunity cost related to holding larger cash balances.

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Employment protection and corporate cash holdings: Evidence from China's labor contract law

Cited by 96 publications

References 53 publications

Employee treatment and discontinued operations

Employee treatment and discontinued operations

Employment protection, production flexibility and corporate capital spending

Unemployment insurance and cash holdings of privately held firms around the world

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