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Urban vibrancy, human capital and firm valuation in China

Author

Listed:
  • Danling Jiang
  • Liu Shuying
  • Feiyu Li
  • Hongquan Zhu

Abstract

Purpose - This paper intends to study how geographic heterogeneity in urban vibrancy, especially in human capital creation, helps explain persist firm valuation dispersion across cities in China. Design/methodology/approach - This paper studies geographic differences in firm valuations of 1,023 listed companies headquartered in 35 major cities in China from 2001 to 2018. The authors estimate panel regressions of local firm Tobin's q on city fixed effects or city endowed attributes in human capital creation after controlling industry-year fixed effects as well as a set of firm and city time variant attributes. Findings - The results show persistent, significant city-to-city differences in Tobin'sq, especially among large, mature or high labor-intensive firms. To explain such geographic differences in firm valuations, the authors identify several factors of the endowed city competitive advantages in creating human capital that play important roles in explaining the persistent geographic firm valuation premia. Originality/value - This paper provides the first systematic analysis of urban vibrancy in human capital supply in explaining persistent geographic firm valuation dispersion in China. The evidence suggests that city endowed comparative advantages in supplying human capital have created long-lasting, and growing, shareholder wealth by attracting and retaining talents and human resources in local firms.

Suggested Citation

  • Danling Jiang & Liu Shuying & Feiyu Li & Hongquan Zhu, 2022. "Urban vibrancy, human capital and firm valuation in China," China Finance Review International, Emerald Group Publishing Limited, vol. 12(3), pages 415-432, January.
    • Handle: RePEc:eme:cfripp:cfri-08-2021-0173
    DOI: 10.1108/CFRI-08-2021-0173
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    Citations

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    Cited by:

    1. Kong, Dongmin & Yang, Yiwei & Wang, Qin, 2023. "Innovative efficiency and firm value: Evidence from China," Finance Research Letters, Elsevier, vol. 52(C).
    2. Long, Houyin & Wu, Guilin & Wang, Jiaxin & Zhang, Pengdong, 2023. "How U.S. job policy affects China's scientific and technological manufacturing firms? A perspective based on the competitive environment," Energy Economics, Elsevier, vol. 126(C).
    3. Zhu, Ling & Liu, Shasha & Kong, Dongmin, 2023. "Governments' fiscal stress and firm decentralization," International Review of Financial Analysis, Elsevier, vol. 90(C).
    4. Bian, Yuxiang & Chen, Lin & Xiong, Xiong & Yang, Jinqiang, 2023. "Private equity valuation under time-inconsistent preferences," Research in International Business and Finance, Elsevier, vol. 65(C).
    5. Ling Zhu & Dongmin Kong, 2023. "Revenue pressure of local governments and firm productivity: Evidence from a natural experiment in China," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(3), pages 721-748, July.
    6. Wu, Zihao & Gao, Jun & Luo, Chengdi & Xu, Hui & Shi, Guanqun, 2024. "How does boardroom diversity influence the relationship between ESG and firm financial performance?," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 713-730.
    7. Zhu, Wenpeng, 2023. "Digital financial inclusion and the share of labor income: Firm-level evidence," Finance Research Letters, Elsevier, vol. 56(C).
    8. Lin, Xiaowei & Li, Ao & Zhang, Pengdong & Chen, Wenchuan, 2023. "The disciplinary role of product market competition on cash holding," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 653-671.
    9. Li, Jianhong & Ding, Jin, 2024. "The peer effects on disclosure of corporate internal control weakness," Finance Research Letters, Elsevier, vol. 61(C).
    10. Song, Yunling & Wu, Hao & Ma, Yan, 2023. "Does ESG performance affect audit pricing? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 90(C).

    More about this item

    Keywords

    Urban vibrancy; Tobin's q; Geographic valuation premium; Human capital; E24; G10; G12; G15; J24;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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