Labour marketisation level and corporate labour investment efficiency: Evidence from China

Abstract

Abstract This study investigates the effect of labour marketisation level on corporate labour investment efficiency. Using a sample of Chinese listed firms, we provide evidence that higher labour marketisation level is associated with higher corporate labour investment efficiency. Firms with higher labour marketisation level reduce over‐investment and under‐investment in labour. In the cross‐sectional tests, we discover that this effect is more prominent for private enterprises and firms with stronger product market competition, more financing constraints, and higher labour adjustment costs. We eliminate the impact of other non‐labour investments and ensure that our results are not driven by these investments.

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