Dismissal Cost,Operating Flexibility And Debt Financing Structure

The economic and social development cannot do without the support of human resources,The concept of "people oriented" has been paid more and more attention,and it is very important for the protection of workers.In 2008,China began to implement the "Labor Contract Law",the law with respect to the labor law in 1995,in the labor contract period,to terminate the labor contract economic compensation,labor dispatch,layoffs,working hours and so on 17 aspects made changes to strengthen the protection of workers' rights and interests.The strengthening of labor protection make the adjustments cost increase when listed companies respond to various business difficulties.(firing costs increase),and Cost Stickiness increased.Artificial cost stickiness will make this part of the cost increase tends to be fixed,resulting in increased operating leverage,reduced operating flexibility.Have a certain alternative between operating and financial leverage,operating flexibility reduces to a certain extent will make the company's default risk increases,which will affect the debt financing structure of labor-intensive manufacturing industry listed companies.In this paper,by reviewed the domestic and overseas literature,combined with the existing research results to research the relationship between firing costs,flexibility and debt management financing structure,and investigated the difference of this kind of influence under the different enterprise nature.In this paper,the implementation of the "labor contract law" is used as a proxy variable for firing costs,using operating leverage as a proxy variable for operating flexibility,and the company's asset liability ratio and short-term loan ratio is used as a measure of the debt financing structure of the indicators.At the same time because the listed companies in the manufacturing industry labor intensity is relatively high,firing costs to defend their impact may be more obvious,so we used the 2004-2015 of China's Shanghai and Shenzhen A shares of two listed manufacturing companies as the research sample to test the relationship between firing costs,operating flexibility and financing structure.On this basis,we discuss whether the different property rights will lead to the impact of firing costs on corporate finance structure is different.The results show that:(1)when the other conditions remain unchanged,the higher the cost of firing,the lower the operating flexibility of the company.(2)Operating flexibility reduced,resulting in a reduction in the size of debt financing and the proportion of short-term loans accounted for the total borrowing rose.This is because of its low elasticity will lead to a higher risk of default,creditors may therefore raise the borrowing conditions.(3)The high firing costs will reduce the operating flexibility,which will weaken the company's debt financing capacity.(4)The effect of firing costs on the company's debt financing in private companies will be more obvious than non private companiesThe conclusion of this paper further enrich the research results about hiring cost and corporate governance.It provides micro evidence for the evaluation of “Labor Contract Law”,and it has certain value of the policy.It also provides a basis for the manufacturing listed companies to deal with the "labor contract law" to develop financing strategies.