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Labor hiring and stock return: A model and new evidence from China

journal contribution
posted on 2020-02-01, 00:00 authored by Y Rong, C Tian, L Li, Xinwei ZhengXinwei Zheng
© 2019 Labor input is an important factor in a firm's production and affects stock return. We use an optimization model to explore the stock return-labor hiring relation with the effects of employment frictions and labor supply. Our model illustrates that labor hiring is negatively related to the expected stock return from the discount rate channel; the negative return-hiring relation becomes steeper when the firm's employment frictions are higher; positive labor supply shock leads to a flatter return-hiring relation. Using Chinese-listed firm data, we provide evidence for the existence of the return-hiring relation and the impact of employment frictions and labor supply confirming the theoretical predictions.

History

Journal

Pacific Basin Finance Journal

Volume

59

Article number

101256

Pagination

1-17

Location

Amsterdam, The Netherlands

ISSN

0927-538X

Language

English

Publication classification

C1 Refereed article in a scholarly journal, C Journal article

Publisher

Elsevier