Laborism, Investment Efficiency in Labor, and Operating Performance Around the World

51 Pages Posted: 1 Jul 2016

See all articles by Boochun Jung

Boochun Jung

University of Hawaii - School of Accountancy

Tony Kang

University of Nebraska - Lincoln

Woo-Jong Lee

Seoul National University

Gaoguang (Stephen) Zhou

Hong Kong Baptist University

Date Written: June 29, 2016

Abstract

We examine how labor-friendly institutional features, i.e., laborism, relate to corporate investment efficiency in labor in a sample that represents 33 countries during 1996 to 2012. We consider various dimensions of laborism such as the presence of left-leaning government, rigidity of employee protection laws, and collectivist culture. We hypothesize that due to higher labor adjustment costs associated with laborism, firms operating in stronger laborism countries make more inefficient labor investment decisions. Supporting this hypothesis, we document that laborism is negatively related to labor investment efficiency – firms deviate more from the optimal level of labor investment in the presence of stronger laborism. We further find that laborism reduces labor productivity as well as future operating performance, aggravating future GDP per capita in the economy.

Suggested Citation

Jung, Boochun and Kang, Tony and Lee, Woo-Jong and Zhou, Gaoguang (Stephen), Laborism, Investment Efficiency in Labor, and Operating Performance Around the World (June 29, 2016). Available at SSRN: https://ssrn.com/abstract=2801938 or http://dx.doi.org/10.2139/ssrn.2801938

Boochun Jung

University of Hawaii - School of Accountancy ( email )

College of Business Administration
Honolulu, HI 96822
United States

Tony Kang

University of Nebraska - Lincoln ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Woo-Jong Lee (Contact Author)

Seoul National University ( email )

Gwanak-ro 1, Gwanak-gu
Seoul, 151-916
Korea, Republic of (South Korea)

Gaoguang (Stephen) Zhou

Hong Kong Baptist University ( email )

Kowloon Tong
Hong Kong
China

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