The impact of employee support on labor investment efficiency: the mediating role of internal control weaknesses

Purpose This study investigates the relationship between employee support and labor investment efficiency, examining the mediating role of internal control weaknesses. The research integrates human capital theory and agency theory to provide a more comprehensive understanding of how employee Support policies affect workforce management efficiency. Design/methodology/approach Using a sample of 1,790 firm-year observations spanning from 2014 to 2023, the study employs regression analysis with panel data. Findings The results reveal that employee support significantly improves labor investment efficiency both directly and indirectly. Companies with stronger employee support demonstrate fewer internal control weaknesses, which in turn leads to more efficient labor investment decisions. The study finds that internal control weaknesses partially mediate the relationship between employee support and labor investment efficiency. Originality/value This study makes a novel contribution by examining the mediating role of internal controls in the relationship between employee support and labor investment efficiency, an aspect previously unexplored in the literature. By integrating multiple theoretical perspectives and investigating both direct and indirect effects, the research provides new insights into how organizations can optimize their human capital management through the complementary interaction of supportive policies and control mechanisms.