This paper investigates the effects of serial acquisitions on labor cost stickiness. We show that serial acquisitions can significantly increase the labor cost stickiness through increasing managerial optimism, agency costs and labor adjustment difficulty, and the labor cost stickiness further damages corporate value. The baseline findings are weaker in firms with better internal control and higher institutional ownership. Overall, this study contributes to the literature on serial acquisitions and cost stickiness, provides a new perspective for the value-destroying effect of serial acquisitions in a typical emerging market.

From the perspective of corporate labor employment, we examine whether debt pressure on local governments prompts them to shift part of their social responsibilities to local firms. We conduct an analysis on Chinese local government debt (LGD) data and find that when LGD is higher, local firms are less likely to cut labor costs when their sales decrease, indicating greater labor cost stickiness. We attribute this to the responsibility-shifting effect, i.e., with heavier debt burdens, local governments intervene more in corporate labor decisions by restricting employee layoffs. Consistent with this argument, we find that the effect of LGD on labor cost stickiness is more pronounced for state-owned and politically connected firms; in regions with lower marketization levels and government fiscal self-sufficient capacities; and when regional unemployment rates, macroeconomic uncertainty, and political risk are higher. We show that through responsibilityshiftingamid high LGD, local governments benefit from a reduction in social expenditures. However, firms with stickier current labor costs will have lower subsequent productivity and market value, despite local governments reciprocating with more subsidies. Overall, LGD not only adversely impacts firm financing through the crowding-out effect but also erodes firm value through the responsibility-shifting effect.