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Social insurance law and corporate performance in China

Author

Listed:
  • Ruan, Peiheng
  • Wang, Shuai
  • Yun, Feng

Abstract

Social Insurance Contributions exert a liquidity constraint on firms and hence influence the performance of firms. By exploiting the enforcement of China's Social Insurance Law (SIL) in 2011 as a quasi-natural experiment, this paper studies the impact of social insurance contributions on the performance of enterprises through a difference-in-differences method. We find that SIL negatively affects the performance of firms, and this effect is more pronounced in firms with weaker cost-shifting capacity. Mechanism tests prove the liquidity constraints channel through the perspective of the firm's cash flow, accounts payable, investment-cash flow sensitivity, and scale of operations. Our findings demonstrate that firms cannot fully mitigate the negative impact brought by Social Insurance Contributions.

Suggested Citation

  • Ruan, Peiheng & Wang, Shuai & Yun, Feng, 2024. "Social insurance law and corporate performance in China," International Review of Economics & Finance, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:reveco:v:94:y:2024:i:c:s1059056024003666
    DOI: 10.1016/j.iref.2024.103374
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    More about this item

    Keywords

    Social insurance law; Social insurance contributions; Cost-shifting capacity; Firm performance; Difference-in-differences model;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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