Internal labor market during firm crisis

Abstract

Due to the lack of typical cases and internal data of enterprises, we rarely have the opportunity to study the internal labor market of enterprises in times of crisis. A large listed company provides a rare opportunity for us to study these issues. From 2015 to 2022, the company has successively experienced listing, receiving penalties from the China Securities Regulatory Commission, stock trading suspension, resumption of trading, and bankruptcy reorganization. During this period, the changes in the company's internal labor market are worth studying. This paper mainly studies two issues. The first question is, when encountering an exogenous shock, what kind of endogenous behavior did the company make under the financial constraints and policy constraints the company faced at that time? Specifically, what kind of compensation strategy did the company adopt? The second question is, how did the compensation arrangement made by the company affect employees' decision to leave? The main research content of this paper is divided into three parts. In Chapter 2, we sorted out the company's events from its establishment to its crisis and finally through the crisis, paving the way for the quantitative analysis that follows. In Chapter 5, we study the company's compensation strategy. Our research is divided into two parts. In the first part, we use a unified framework to think about the company's different compensation strategies in four stages: First, what kind of exogenous shocks has the company encountered? Secondly, what constraints did the company face when it encountered a shock? Finally, under such exogenous shocks and constraints, what endogenous behavior did the company make? Specifically, what kind of compensation strategy did the company adopt? In the second part, we focus on the company’s compensation strategy from January 2018 to December 2019. At this stage, the company has truly entered a crisis, and the external situation it faces was complex and changeable, making the company's compensation strategy also very complex. In Chapter 6, we examine how a company's compensation strategy affects employees' decision to leave. We found that salary increases can significantly reduce the probability of employees leaving, and salary decreases can significantly increase the probability of employees leaving, and both measures are more useful in non-crisis periods than in crisis periods.