Digital finance and corporate labor costs: An analysis from the perspective of financing channels

Using data from China's A-share listed companies between 2013 and 2021, this paper examines the impact of digital finance development on corporate labor costs. The results show that the development of digital finance can significantly increase firms' expenditures on labor costs. This conclusion remains valid in both robustness tests and endogeneity tests. Based on the theoretical analysis and mechanism tests of three financing channels, we find that digital finance can increase firms' labor cost expenditures not only by alleviating the financial constraints faced by firms (bank credit financing), but also by enhancing firms' ability to cope with financial constraints (internal financing and trade credit financing). In addition, heterogeneity analysis reveals that the promoting effect of digital finance on corporate labor costs is more significant for firms located in regions with more intense bank competition and for private-owned firms. Further analyses show that the development of digital finance will significantly increase the salaries of directors, supervisors, and senior managers and the wages of technical staff.