We examine the effect of minority shareholder voting rights on labor investment efficiency using a sample of Chinese firms. Taking advantage of the difference-in-difference setting, our study reveals that the expansion of minority shareholder voting rights has a detrimental effect on labor investment efficiency. Through analysis of holding period and a managerial shortsightedness index based on textual analysis, we find that this outcome can be attributed to the fact that minority shareholders typically prioritize short-term gains over long-term corporate growth. Moreover, the impact of voting power is more pronounced in determining the investment efficiency of rank-andfileemployees. Our results are more significant for firms that face severe financial constraints, are non-state-owned enterprises, exhibit lower levels of internal control, possess fewer female managers, demonstrate lower human capital quality and higher labor intensity. Taken together, our paper suggests that minority shareholders could be myopia in making labor decisions.

This study examines the impact of social insurance contributions on corporate environmental investments. Adopting a quasi-natural experimental design based on the implementation of 2011 Social Insurance Law in China, we employ a difference-in-differences model and find that the increase in social insurance contributions prompts firms to increase their environmental investment. This effect is more pronounced for firms that exhibit higher labor intensity, and are located in regions with stricter environmental regulations, as well as those with politically connected CEOs. Our research provides valuable insights into the factors that influence firms’ environmental investment from the perspective of firm-government interaction.

Using a proprietary bank-loan-level dataset, we find a surprising negative relation between loan spreads and minimum wage. We propose a stylized model to explain the relation: banks filter out the low-quality borrowers after the wage shocks, resulting in a separating equilibrium. Our evidence is consistent with the model’s predictions: (1) city-level and firm-level evidence shows that an increase in minimum wage is negatively associated with the likelihood of obtaining bank loans, especially for labor-intensive borrowers, (2) deal-level evidence shows that both the average default rate and loan spreads decrease when minimum wage rises, and (3) subsequently, labor intensive firms that are still able to obtain bank loans when minimum wage rises outperform their peers. Our findings suggest that as more credit resources are allocated to better quality firms and leave other firms far more behind, the existence of such credit reallocation effects can exacerbate the divergence between higher and lower quality firms induced by an increase in minimum wages.

The widespread replacement of gross receipt tax (GRT) with value-added tax (VAT) is an important phenomenon in the past half-century. Theory predicts that such tax reforms reduce vertical integration, increase production efficiency, and improve industrial structure. We exploit the tax reform that replaced GRT with VAT for service industries in China and find empirical evidence consistent with theoretical predictions. First, the tax reform increases the probability and intensity of outsourcing for both manufacturing and service firms. The increase is larger for industries more heavily reliant on treated intermediate industries for production and for firms with higher capital–labor intensity. Second, the reform increases total factor productivity and labor productivity. Third, the reform affects industry structure by boosting sales and promoting the employment of treated service industries.