How Does CEO Famine Experience Affect Corporate Labour Cost Stickiness?

Abstract

We identify a positive correlation between CEOs’ famine experiences and labor cost stickiness, driven by altruism rooted in emotional morality. This effect is significant in state-owned enterprises (SOEs) and intensifies with higher CEO power or education levels. The stickiness stems primarily from higher employee retention, especially for production workers and less-educated employees, rather than stable wages. Altruistic decisions, though seemingly at odds with rational profit maximization, enhance long-term firm performance. This study highlights the role of moral-emotional factors in labor cost decisions, filling a gap in understanding beyond efficiency or agency-based explanations.

Keywords: Famine experience, Labour cost stickiness, Altruism, Labour cost behaviour