Journal of Corporate Finance Vol. 70 2021
Air pollution and employee treatment
Abstract
Although the impacts of air pollution on individual health are well documented, it is unclear whether and how air pollution affects firm strategy on employee treatment. This study examines this issue in the context of China and presents strong evidence that air pollution significantly enhances employee treatment. To establish causality, we further instrument for air pollution using thermal inversions, introduce a regression discontinuity approach relying on the Huai River boundary, and a falsification test. Monetary compensation, safety security, and career training jointly determine our findings. Two plausible mechanisms are corporate brain drain and public attention. Our results are more pronounced for non-state-owned firms, and firms with less financial constraints, intensive R&D or competition, and increased job market opportunities. Overall, we highlight that air pollution is an important noneconomic factor driving firms' human capital and employee treatment strategy.
- DOI
- 10.1016/j.jcorpfin.2021.102067
- Volume
- 70
- Pages
- 102067
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref