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Labor cost and stock price crash risk: Evidence from China

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  • Tang, Qi

Abstract

This study investigates the causal impact of labor cost on stock price crash risk in China. We utilize a quasi-natural experiment, the 2011 "Social Insurance Law," as an exogenous shock to labor cost and employ a difference-in-differences estimation. Our results demonstrate that strengthening labor cost significantly reduce the stock price crash risk, and this conclusion holds after conducting a series of robustness tests. Heterogeneity analysis indicates that this effect is more pronounced in state-owned enterprises and firms with low financing constraints. Our findings suggest that labor cost/protection generates positive outcomes at the firm-level, thereby promoting stock price stability.

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  • Tang, Qi, 2023. "Labor cost and stock price crash risk: Evidence from China," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003434
    DOI: 10.1016/j.frl.2023.103971
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    References listed on IDEAS

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