Empowerment or Negative Energy: ESG Performance and Labor Investment Efficiency of Enterprises

Zhang Zenan, Xia Yujie, Zhang Xuemei

Foreign Economics & Management Vol. 46, Issue 07, pp. 69 - 85 (2024)  DOI:10.16538/j.cnki.fem.20240120.201

Summary

With the concept of green and sustainable development gaining popularity, ESG has been gradually becoming a core element of corporate decisions. It has a profound impact on the structural reform of the supply side and the healthy and orderly development of the labor market, and whether it can effectively improve labor investment efficiency deserves in-depth study. Taking A-share listed companies from 2011 to 2021 as the research sample, this paper empirically examines whether the impact of ESG performance on labor investment efficiency is “empowerment” or “negative energy”. The study finds that ESG performance is helpful to improve the labor investment efficiency of enterprises, which is mainly achieved through the two mechanisms of alleviating financing constraints and enhancing corporate employee innovation. Heterogeneity analysis shows that ESG performance has a more significant promoting effect on the labor investment efficiency of non-state-owned enterprises, lower audit-quality enterprises, non-high-tech enterprises, and enterprises with a lower competitive market position, showing a positive governance effect. Further analysis finds that ESG performance can significantly inhibit labor overinvestment and underinvestment, which is mainly reflected in alleviating overemployment, underemployment, and over-layoff. The findings of this paper have important policy implications for further promoting the fulfillment of corporate ESG responsibilities, optimizing labor resource allocation, and promoting high-quality economic development.

Keywords

ESG performance; labor investment efficiency; financing constraints; corporate innovation