Deleveraging for talents: Human capital reliance and corporate leverage

YunGuo Liu, Minghui Zheng, Yue Xu and Sujuan Xie

Accounting and Finance, 2023, vol. 63, issue 5, 4823-4847

Abstract: Using data from Chinese listed firms, we develop a measure of a firm's reliance on human capital that is based on its demand for highly educated employees. We find that a high reliance on human capital is linked to low corporate leverage, and this effect is more pronounced among firms at a high risk of human capital mobility and those facing high skilled‐labour adjustment costs. Our results indicate that firms strategically manage their capital structure to maintain financial flexibility, enabling them to effectively respond to the labour‐related costs associated with human capital losses and costly labour adjustments.

Date: 2023
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https://doi.org/10.1111/acfi.13142

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