Bank liability structure and corporate employment: Evidence from a quasi-natural experiment in China

Xiaoxiong Chen, Jinghao Mu, Guanchun Liu and Yuanyuan Liu

International Review of Financial Analysis, 2024, vol. 95, issue PA

Abstract: We examine how bank liability structure affects firms' hiring decisions. To identify causality, we utilize the 2014 interbank borrowing reform that has different impacts on national and regional banks as an exogenous shock. Particularly, we construct the exposure of firms to this reform and then run a difference-in-differences regression. The results show that an increase in banks' deposit funds promotes corporate employment, and the number of total employees on average increases by 4.4%. Further mechanism tests find that banks provide more loans and firms obtain more access to bank credit, confirming the credit constraints channel. Moreover, the corporate employment promotion effect is stronger when financial constraints, information disclosure quality and labor intensity are higher. In addition, firms' employee composition and average wage paid to workers do not change, while their productivity and production scale increase. Overall, our evidence highlights the active role of regulating banks' interbank borrowing in stabilizing social employment.

Keywords: Bank liability structure; Corporate employment; Credit constraints; China (search for similar items in EconPapers)
JEL-codes: E24 G21 G31 J23 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pa:s1057521924002989

DOI: 10.1016/j.irfa.2024.103366

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