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Capital market frictions and human capital investment: Evidence from workplace safety around regulation SHO

Author

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  • John (Jianqiu) Bai
  • Eunju Lee
  • Chi Zhang
Abstract
This paper examines the effect of capital market frictions on firms’ workplace safety. Using Regulation SHO as a natural experiment, we find a significant increase in work‐related injury rates of pilot firms. The effect is stronger for firms in more competitive industries and with high financial constraints, and weaker for firms whose employees have high negotiating power and with good corporate governance. Further tests suggest that managers’ myopia shifts their focus away from investments in workplace safety when workplace safety is not related to firm performance. Overall, the results highlight how capital market frictions affect firms’ investment in human capital.

Suggested Citation

  • John (Jianqiu) Bai & Eunju Lee & Chi Zhang, 2020. "Capital market frictions and human capital investment: Evidence from workplace safety around regulation SHO," The Financial Review, Eastern Finance Association, vol. 55(2), pages 339-360, May.
    • Handle: RePEc:bla:finrev:v:55:y:2020:i:2:p:339-360
    DOI: 10.1111/fire.12227
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    References listed on IDEAS

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    Cited by:

    1. Amin, Md Ruhul & Kim, Incheol & Lee, Suin, 2021. "Local religiosity, workplace safety, and firm value," Journal of Corporate Finance, Elsevier, vol. 70(C).
    2. Jing Xiao & Yan Zhou & Ping Zeng, 2024. "How does green strategy orientation promote substantive green innovation? Evidence from Chinese manufacturing enterprises," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-31, December.
    3. Xuan Wu & Yueting Li & Yangxin Yu, 2023. "CEO Inside Debt and Employee Workplace Safety," Journal of Business Ethics, Springer, vol. 182(1), pages 159-175, January.
    4. Minxing Sun & Weike Xu, 2024. "Short selling and readability in financial disclosures: A controlled experiment," The Financial Review, Eastern Finance Association, vol. 59(2), pages 265-292, May.

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