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Does the deleveraging policy increase corporate labor outsourcing? —Evidence from China

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  • Chen, Yanlong
  • Wang, Bencheng

Abstract

We examine how firms use labor outsourcing to reduce costs and enhance competitiveness under China’s deleveraging policy. Using data on A-share listed firms from 2013 to 2019, our difference-in-differences estimates show the policy increased labor outsourcing levels by 61.5 %. Channel analysis indicates that highly leveraged firms face financing constraints and elevated default risks, prompting cost-reduction strategies through greater outsourcing. By adjusting both the scale and structure of outsourcing and internal employment, firms shift noncore activities to specialized providers while hiring more high-skilled labor internally. This reallocation channels resources toward core functions and high-value-added activities (capital investment with research and development), achieving cost savings and strengthening competitiveness.

Suggested Citation

  • Chen, Yanlong & Wang, Bencheng, 2025. "Does the deleveraging policy increase corporate labor outsourcing? —Evidence from China," Finance Research Letters, Elsevier, vol. 85(PE).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pe:s1544612325015235
    DOI: 10.1016/j.frl.2025.108269
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    References listed on IDEAS

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