Effect of corporate holding financial institutions on corporate employment: Evidence from China

Existing literature has demonstrated the aggregation and allocation effects of corporate-holding financial institutions on financial resources, but the discussion of how they will affect corporate employment is scarce. Therefore, using data from China's A-share listed companies from 2010 to 2021, this study examines whether holding financial institutions can affect corporate employment, thereby benefiting the real economy. Empirical results show that holding financial institutions significantly expands corporate employment, especially during tight monetary policy, in financially underdeveloped areas, and for enterprises with high financing constraints, weak external supervision, and high labor intensity. The conclusion remains valid after a series of robustness tests. Mechanism tests show that holding financial institutions can increase corporate employment by reducing liquidity constraints and preventing the dissipation of internal funds caused by agency issues. Further discussion reveals that holding financial institutions has significantly improved corporate operating performance and increased executive and ordinary employee salaries, implying that there is no “executive plunder” following profit increases. Meanwhile, holding financial institutions generates spillover effects along the supply chain, expanding corporate employment between major suppliers and customers. This paper has important implications for achieving high-quality economic development through the “finance serves the real economy” measures.