Environmental tightening, labor slackening: Unveiling the inefficiencies in labor investment

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE

International Review of Financial Analysis Pub Date : 2025-02-01 DOI:10.1016/j.irfa.2025.103982

Chien-Chiang Lee , Chih-Wei Wang , Weizheng Lin , Fang-Yi Lee

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Abstract

This paper investigates the impact of environmental policy stringency (EPS) on labor investment inefficiency using a dataset of firms from 37 countries. Our study contributes to the literature by addressing a gap in understanding how stringent environmental policies influence corporate labor decisions, particularly regarding inefficient labor investments. To deal with potential endogeneity, we employ robust methodologies, including Two-Stage Least Squares (2SLS) and Difference-in-Differences (DID). Our findings consistently demonstrate that heightened EPS exacerbates labor investment inefficiency. We further explore the mechanisms behind this relationship, revealing that enhanced ESG practices and green innovation serve as mitigating factors. Additionally, the relationship between EPS and labor investment inefficiency is more pronounced in non-crisis periods and more evident in Asia than in other regions. These results carry important implications for policymakers and firms, highlighting the need for strategic labor management and investment in ESG practices under stringent environmental regulations.

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来源期刊

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.