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Will Cleaner Air Reduce Corporate Labor Cost?
Shen Yongjian (沈永建)1 , Yu Shuangli (于双丽) 2 and Jiang Dequan (蒋德权)3*
1 School of Accounting, Nanjing University of Finance and Economics, Jiangsu, China
2 DongWu Business School, Soochow University, Jiangsu, China
3 School of Accountancy, Shanghai University of Finance and Economics, Shanghai, China
Abstract:With China’s listed companies from 2005 to 2015 as samples, this paper investigates how air quality influences labor cost based on city-level air quality data. Our study finds a significant negative correlation between air quality and corporate employee compensation – such a negative correlation is particularly strong in regions where employees are more rights-conscious and for companies that are non-labor-intensive. By adjusting employee compensation according to air quality, firms will increase their future corporate value. In addition, air quality has significantly differentiated effects on employee compensation for firms of different ownership nature and different level of cash on hand. Further research reveals that the effects mainly stem from poor air quality. In general, extreme air quality changes will lead to a difference of 14,210 yuan in the annual average compensation to employees from sample companies, or a labor cost difference of around 23 trillion yuan for all companies nationwide during the sample period. Our research conclusions have broadened the scope of research on how air quality influences firm behavior, and provide empirical reference for employee motivation and cost management, as well as empirical evidences for China’s policy principle that “lucid waters and lush mountains are invaluable assets”.
Keywords:air quality, labor cost, employee motivation, non-monetary benefit
JEL Classification Codes: J31, Q53, D01
DOI: 10.19602/j .chinaeconomist.2020.11.08
