Minimum Wage Provisions,Labor Costs And Corporate Behavior

The Minimum Wage policy is one of the main measures of government departments to regulate the national labor market.China’ s original ministry of labor issued the “Enterprise Mminimum Wage Provisions” in 1993,issued the new “Mminimum Wage Provisions” in 2004,marking the implementation of the Minimum Wage policy.Whether and how the minimum wage policy acts on the real economy,that is,the transmission mechanism and consequences of the minimum wage policy,has been widely concerned in academia.However,China’ s small and medium-sized enterprises to a large extent rely on extensive growth mode and demographic dividend to promote economic growth.On the one hand,with China’ s economy changing from high-speed to medium-high-speed development,the economic structure has been optimized,upgraded and adjusted.On the other hand,China’ s financial system has been criticized for the difficulty and high financing cost of SMEs.The government has been hoping to alleviate this problem by lowering the production costs of SMEs and providing more channels for loans.In this context,it is urgent to answer the question of how the increase of labor cost caused by the increase of minimum wage affects enterprises’ behavior,and what impact the shortage of capital and financing constraint will have.This thesis reviews the existing studies on the minimum wage policy,carefully sorts out the specific practice of the minimum wage policy in China in recent years,as well as the causes and development status of the financing constraint problem of small and mediumsized enterprises,and expounds the behavior distortion caused by the financing constraint problem caused by the increase of labor cost of small and medium-sized enterprises.On this basis,this thesis carries out empirical research to investigate the effectiveness of China’s minimum wage policy from three aspects: Minimum Wage,Rising Labor Cost and Corporate Earnings Management,Minimum Wage,Labor Cost and Corporate Tax Avoidance and Minimum wage,Rising Labor Cost and Corporate Product Quality.Firstly,this thesis takes Chinese enterprises above industrial scale as the sample of enterpises SMEs,collecting minimum wage data at the county level manually,and empirically analyzes the impact of minimum wage policy changes on enterprise earnings management by using the identification method of sharing counties within a certain range(75,50 and 25km)on both sides of the border of the same county.It hypothesizes that the county boundaries at either end of the company may be comparable in the characteristics of the minimum wage,since adjacent geographic areas are highly similar in labor supply,geographic resource endowment,public infrastructure,market conditions,and other imperceptible factors.Over the period 2004-2013 in our sample range,this thesis found that enterprises engaged in upward earnings management in response to a rise in the minimum wage,particularly in state-owned enterprises,higher levels of innovation demand,competitive industries and banks are more competitive.This thesis also find that enterpises will adjust earnings management upwards to make it easier to obtain capital,while with a high degree of earnings management will get more capital to improve their future performance.These results show that labor market policies have a strong impact on corporate finance.Secondly,selecting enterprises which above size of Chinese industrial enterprises as samples,this thesis finds that Minimum wage policy affects enterprise financing and other financial decisions,not only “open source” but also “reduce expenditure”.First,the thesis studies corporate tax avoidance from the perspective of micro-mechanism,which deepens our understanding of the determinants of corporate tax avoidance.When companies face rising labor costs,they may choose to avoid taxes to offset those costs.When enterprises face rising Labour costs,they may choose to offset them by avoiding taxes.At the same time,the New Labor Contract Law significantly increases the impact of the minimum wage on corporate tax avoidance.Moreover,the impact of the minimum wage on tax avoidance is particularly pronounced in non-state enterprises,financially constrained enterprises and government intervention are high.This section contributes to the emerging labor and financial literature by assessing the economic consequences labor market factors(minimum wage policies)at the firm level.Thirdly,based on manually collected and sorted minimum wage data at the county level,this thesis also empirically investigates the impact of minimum wage policy on the product quality of enterprises.Empirical results show that although minimum wage significantly increases labor costs and are widespread worldwide,their impact on export quality is poorly understood.This thesis uses geographically discontinuous designs to provide strong evidence that increases in minimum wages significantly improve the quality of enterprises’ exports.Our findings are more pronounced in the enterprises for non-state,foreign and innovative,fewer financial constraints,exporting to developing countries,export a wider range of products,and dominated by foreign technology companies.The plausible mechanism is for enterprises to increase productivity and innovation by hiring skilled workers and firing unskilled labors.Our findings shed new light on the economic impact of labor market policies on corporate products quality.Finally,this thesis summarizes the main research conclusions and puts forward relevant policy Suggestions.At the same time,the shortcomings of this thesis are clarified and the future research is prospected.