Credit stimulus and corporate excess employees |
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| Institution: | 1. School of Accountancy, Shanghai University of Finance and Economics, China;2. Department of Finance, Huazhong University of Science and Technology, 1037 Louyu Road, Wuhan 430074, China;3. Department of Accounting, School of Management, Jinan University, China;1. School of Economics and Management, Southwest Jiaotong University, Chengdu, China;2. College of Management, Yuan Ze University, Taoyuan, Taiwan;1. Worcester Polytechnic Institute, 100 Institute Rd, Worcester, MA 01609, United States of America;2. Broadwell College of Business and Economics, Fayetteville State University, Fayetteville, NC 28301., United States of America;2. School of Business, Western Washington University, 516 High St, Bellingham, WA 98225, USA;1. School of Accounting, Zhongnan University of Economics and Law, 182 Nanhu Avenue, Wuhan 430073, China;2. School of Accountancy, Shanghai University of Finance and Economics, 777 Guoding Road, Shanghai 200433, China;4. School of Accounting, Southwestern University of Finance and Economics, 555 Liutai Avenue, Chengdu 611130, China;5. Research Center of Finance, Shanghai Business School, 123 Fengpu Avenue, Shanghai, China |
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| Abstract: | This study examines how the large and unexpected Chinese credit stimulus in 2008 affects firms' labor decision. Using a large sample of industrial firms, we find that state-owned enterprises tend to hire more employment than their counterparts after the credit stimulus. Mechanism analysis shows that the credit stimulus package is followed by lower financing costs and more bank loans for the state-owned enterprises, enhancing the degree of their excess employment compared with their counterparts. Moderating effect tests suggest that the overemployment effect is stronger in provinces with a high unemployment level, where the political leaders have stronger promotion incentives, in industries that are selected as the key stimulating industry, and in provinces with higher bank competition level, but weaker in provinces with higher marketization level. Finally, we find that the firm's overemployment caused by the credit stimulus plans decreases firm labor productivity. Overall, our findings shed light on how credit policy influence firms' labor decision and offer important implications for regulators. |
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