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Government regulation on corporate compensation and innovation: Evidence from China's minimum wage policy

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  • Liu, Guangqiang
  • Lv, Lingli

Abstract

This study examines how minimum wage policy shapes firm innovation in an emerging market. We find that minimum wage increases in regions where firms are located stimulate firm innovation significantly. This incentive effect, transmitted mainly through higher labor costs that lower firm profits and force the existing staff to upgrade their skillsets and improve the firm workforce structure, is pronounced in labor-intensive industries and non-state-owned enterprises. Our findings provide policy implications for governments concerned with labor protection and firm transformation and upgrading.

Suggested Citation

  • Liu, Guangqiang & Lv, Lingli, 2022. "Government regulation on corporate compensation and innovation: Evidence from China's minimum wage policy," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004585
    DOI: 10.1016/j.frl.2022.103272
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    References listed on IDEAS

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    Cited by:

    1. Zhao, Meiyu & Zhang, Bo, 2023. "Credit corruption, financial constraint and corporate innovation: Evidence on China," Finance Research Letters, Elsevier, vol. 53(C).
    2. Yao, Wenyun & Qian, Yuhang & Yang, Hang & Xu, Wei, 2023. "Does minimum wages affect executive compensation? – Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).

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