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Geographic Dispersion of Subsidiaries and Labour Investment Efficiency

Author

Listed:
  • Qian Sun
  • Xiaohui Wu
  • Jialing Li
  • Libin Qin

Abstract

Amid rising deglobalisation pressures, China has adopted a ‘dual circulation’ development paradigm. Consequently, numerous barriers that once impeded interregional capital flows have been lifted, facilitating firms' pursuit of more geographically dispersed operations. However, such dispersion may present significant challenges related to firms' labour investment. To enhance understanding of these challenges and offer insights for other economies exploring similar strategies, we investigate the impact of geographic dispersion on labour investment efficiency. Our findings indicate that greater corporate geographic dispersion is significantly associated with lower labour investment efficiency, which primarily manifests in overinvestment, particularly overhiring. Further analysis suggests that intensified agency problems, weakened internal control quality and reduced corporate transparency contribute to this inefficiency. Cross‐sectional analyses demonstrate that this negative effect is less pronounced in firms with stronger managerial supervision, better labour investment optimisation capabilities and a richer external information environment. Overall, our findings underscore the importance of labour investment efficiency as a key consideration in the geographic dispersion process. Strengthening corporate governance, enhancing firms' capabilities to optimise labour investment and fostering a richer external information environment can help address this issue.

Suggested Citation

  • Qian Sun & Xiaohui Wu & Jialing Li & Libin Qin, 2025. "Geographic Dispersion of Subsidiaries and Labour Investment Efficiency," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(4), pages 3889-3922, December.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:4:p:3889-3922
    DOI: 10.1111/acfi.70072
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