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Human capital and labor costs are crucial for the sustainable growth of organizations, and take a vital role in affecting bank efficiency and banking power. This research empirically investigates whether labor employment protection affects banking power. The analysis exploits the staggered adoption of Wrongful Discharge Laws (WDLs) as a quasi-exogenous shock to employment protection. A Difference-In-Difference research design is implemented to study the impacts of WDLs on banking power, and the main results show that there exists a decline of banking power for commercial banks headquartered in states that adopt employment protection. This study further tests the main mechanism through which WDLs affect banking power and finds that the impaired banking power is primarily due to cost inefficiency but not profit inefficiency. Moreover, the adoption of wrongful discharge laws increases commercial banks’ labor costs and induces bank risk-taking.
Desheng Yin; Xinting Zhen. Employment Protection and Banking Power: Evidence from Adoption of Wrongful Discharge Laws. Sustainability 2021, 13, 1635 .
AMA StyleDesheng Yin, Xinting Zhen. Employment Protection and Banking Power: Evidence from Adoption of Wrongful Discharge Laws. Sustainability. 2021; 13 (4):1635.
Chicago/Turabian StyleDesheng Yin; Xinting Zhen. 2021. "Employment Protection and Banking Power: Evidence from Adoption of Wrongful Discharge Laws." Sustainability 13, no. 4: 1635.
Purpose The purpose of this paper is to empirically investigate universal banks as an important source of external funding and their effects on borrowing firms’ innovation outputs. Design/methodology/approach The authors employ regression analyses including a difference-in-difference approach and a two-sided matching method to ensure the robustness of the findings. The authors further explore some potential channels and boundary conditions for the main findings. Findings The authors find that borrowing from universal banks is negatively associated with the quantity of firm innovation, but not the quality of firm innovation. The authors document that borrowing firms reduce their R&D expenditures and rely more on external partners to produce innovation outputs after loan originations from universal banks. The negative relation between universal bank lending and the quantity of firm innovation is more prominent for unrelated innovation and for financially constrained firms. Research limitations/implications The evidence reveals that universal banks may use their informational advantage and market power to limit their corporate borrowers’ investment in innovation activities. Originality/value The paper extends the line of research on the source of financing and firm innovation, and establishes a robust relationship between capital market and product market.
Haizhi Wang; Desheng Yin; Xiaotian Tina Zhang; Xinting Zhen. Whom you borrow from matters: universal banks and firm innovation. Managerial Finance 2019, 45, 1001 -1019.
AMA StyleHaizhi Wang, Desheng Yin, Xiaotian Tina Zhang, Xinting Zhen. Whom you borrow from matters: universal banks and firm innovation. Managerial Finance. 2019; 45 (8):1001-1019.
Chicago/Turabian StyleHaizhi Wang; Desheng Yin; Xiaotian Tina Zhang; Xinting Zhen. 2019. "Whom you borrow from matters: universal banks and firm innovation." Managerial Finance 45, no. 8: 1001-1019.