Banking Sector Competition and Corporate Labor Income Share—Empirical Evidence from Chinese Listed Companies

The structure of national income distribution not only affects long-term sustainable economic development, but also relates to social harmony and stability. This paper explores the effects, paths of action and heterogeneous characteristics of banking competition on firms’ labor income shares using data from city-level commercial bank branches as a research sample of Chinese listed firms. It is found that banking competition can significantly increase the labor income share of firms, and the above findings still hold after a series of robustness tests. The path analysis suggests that banking competition is responsible for increasing firms’ labor income share by reducing debt financing costs, stimulating firms’ technological innovation and increasing individual credit access. Heterogeneity tests show that the positive effect of banking competition on the labor income share is more pronounced for firms that are private, small and medium-sized, in labor-intensive industries, and with small union size. The research of this paper enriches the results related to banking competition and labor income share of enterprises, and also provides a basis for decision making and policy reference to solve the serious imbalance of labor income distribution in China and a series of economic and social problems that may be brought by it, such as the polarization between rich and poor and the intensification of social conflicts.