Employment protection and stock price crash risk: Evidence from China’s introduction of the labor contract law

Qianru Zhuo, Yuanfeng Lin, Yajie Qiu, Zhe Shen and Zhiqiang Wang

Research in International Business and Finance, 2024, vol. 71, issue C

Abstract: Using exogenous variations associated with the introduction of China’s Labor Contract Law, this paper investigates whether and how employment protection affects stock price crash risk. We document evidence of a significant increase in future stock price crash risk by 48 %, at least for those most affected firms relative to those least affected following the law’s introduction. Further analysis suggests that the positive relationship is more pronounced for firms with low-cost elasticity, high labor expenditure, and low firm profitability, for firms facing more asymmetric information, firms with weak corporate governance, non-state-owned enterprises (SOEs), and firms in regions with relatively weak labor protection. Taken together, our study highlights the importance of employment protection in shaping corporate behavior. [141 words]

Keywords: Employment Protection; Stock Price Crash Risk; China (search for similar items in EconPapers)
JEL-codes: G14 G32 J38 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531924002472
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:71:y:2024:i:c:s0275531924002472

DOI: 10.1016/j.ribaf.2024.102454

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().