Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
8942379 | Pacific-Basin Finance Journal | 2018 | 18 Pages |
Abstract
Using a unique regulatory change (the enactment of the Labor Contract Law) in China, we find that the strengthening of labor protection leads to a significant increase in firm transparency. Further analyses indicate that stronger labor protection reduces operating flexibility, which can exert external pressure on firms and exacerbate managerial short-termism problems. To counteract the unfavorable challenge, shareholders re-contract with managers by granting more equity incentives and less perks. This improved compensation structure relieves managers from short-term concerns and incentivizes them to disclose more firm-specific information. Our findings provide new insights on the bright side of labor protection and shed light on how stringent laws can shape the information environment in emerging markets.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Xiaoran Ni, Weikang Zhu,