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Labor cost stickiness and corporate investment efficiency

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  • Zhang, Xin’ai
  • Luo, Wenjing
  • Qin, Yiyang
  • Li, Jianjun
  • He, Yongting

Abstract

Labor cost stickiness may greatly slow down a firm’s response to external changes. This paper, drawing on comprehensive data of China from 2012 to 2024, explores its implications for investment efficiency. We offer strong evidence that labor cost stickiness undermines firms’ investment efficiency. Moreover, this negative impact is stronger for companies with better employee protection and weaker management incentives. Detailed analyses show that tighter financial constraints and higher operating expenses are crucial economic channels. Our findings are persistent across various tests. In sum, this paper enriches the studies on the intersection between corporate finance and labor economics.

Suggested Citation

  • Zhang, Xin’ai & Luo, Wenjing & Qin, Yiyang & Li, Jianjun & He, Yongting, 2026. "Labor cost stickiness and corporate investment efficiency," Finance Research Letters, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:finlet:v:98:y:2026:i:c:s1544612326002618
    DOI: 10.1016/j.frl.2026.109730
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