How does Corporate Cash Holdings Decision Impact the Labor Income Share

GUAN Zi-huan; ZHAO Yun-ning; LUO Wen-yi; DING Si

Volume 39 Issue 2

Mar. 2024

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Article Navigation > Journal of Guangdong University of Finance & Economics > 2024 > 39(2): 102-113

GUAN Zi-huan, ZHAO Yun-ning, LUO Wen-yi, DING Si. How does Corporate Cash Holdings Decision Impact the Labor Income Share[J]. Journal of Guangdong University of Finance & Economics, 2024, 39(2): 102-113.

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GUAN Zi-huan, ZHAO Yun-ning, LUO Wen-yi, DING Si. How does Corporate Cash Holdings Decision Impact the Labor Income Share[J]. Journal of Guangdong University of Finance & Economics, 2024, 39(2): 102-113.

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How does Corporate Cash Holdings Decision Impact the Labor Income Share

1.
Lingnan College, Sun Yat-sen University, Guangzhou 510275
2.
Business School, Central South University, Changsha 410083
3.
School of Economics and Management, Tongji University, Shanghai 200092
4.
Wanlian Securities Co. Ltd., Guangzhou 510623, China

Received Date: 2023-12-02
Available Online: 2024-04-11
Publish Date: 2024-03-28

Abstract

Abstract

The rise in the labor income share is crucial to ensuring that individuals partake in the benefits of economic and social progress.In contrast to the widespread decline in labor income share globally, a phenomenon of "rising against the trend" is observed in post-financial crisis in China. Utilizing a sample of A-share listed companies in China spanning from 2007 to 2021, this paper constructed a theoretical model to explore the impact of corporate cash holding on the share of labor income from the micro perspective of corporate cash holding decisions, and analyzed the impact of financing constraints and technological innovation on the above relationships. It is found that the optimal cash holding level of enterprises has a negative impact on the share of labor income; when financing constraints are eased or technological innovation accelerates, companies' cash distribution for labor incentives will increase, and the share of labor income will consequently rise, thus intensifying the negative correlation between them. The analysis of industry heterogeneity indicates that in labor-intensive industries, higher labor costs reduce incentives for cash allocation to labor factors. Financing constraints play a significant role in lower incentives in capital-intensive industries, and inadequate labor-biased technological innovation contributes to lower incentives in technology-intensive sectors. The conclusions offer fresh empirical insights into comprehending the impact of cash holding decisions and the "mystery of the contrarian rise" of labor income share in China. Additionally, the findings prompt valuable considerations for standardizing the order of income distribution.
- corporate cash holdings,
- labor income share,
- financing constraints,
- technological progress,
- moderating effect

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References

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