Research On Impact Of Enterprise Debt Ratio On Labor Income Share

The share of labor income is the key point in the reform of distribution system.Its changing is related to so many fractions,such as initial distribution of society which has a Far-reaching impact on social investment,savings and consumption and all of these directly or indirectly changes our lives.Besides,it’s also effect the health and sustainable development of the entire national economy.In recent years,although the proportion of labor income in China has risen,it is still at a low level.Since the international financial crisis,the importance of leverage in the economic and financial environment has been paid more and more attention.However,few literatures have studied the effect of leverage ratio on income distribution,especially on the distribution of labor force in initial income distribution.Therefore,it is of great theoretical and practical significance to study the impact of corporate debt ratio on labor income share.The higher the debt ratio,the higher the probability of bankruptcy and the higher the expected cost of bankruptcy to the enterprise,the higher the risk compensation of workers who may use the threat of delaying in place turnover in order to obtain a higher share of profits and maintain the total output rate.Under certain output,the proportion of labor income will increase.In addition,we also refer to the classical principal-agent model of Jia Kun et al.(2016)and Holmstrom & Milgrom(1987)which also show that when debt ratio increases and enterprise risk increases,enterprises facing greater risks will compensate workers with more income and increase the share of labor income.Based on the data of Chinese industrial enterprises from 1998 to 2007,this paper uses the two-way fixed effect model to analyze the income distribution effect of enterprise debt ratio,and further grouped regression to illustrate the impact of debt ratio on labor income share in enterprises with different ownership types,different regions and different factor intensities.The research shows that the debt ratio of enterprises has a significant positive impact on the change of labor income share.This conclusion is still robust under the regression model with the lag term of the debt ratio of enterprises as a tool variable and the use of alternative indicators.The increase of the debt ratio of enterprises may affect the labor income share by affecting the bargaining power of workers.Non-state-owned enterprises are more sensitive when regressing according to different forms of enterprise ownership.In addition,the location difference,the type difference of enterprise factor input and the length of debt maturity will all have an impact on the size of the debt ratio affecting the share of labor income.In view of the above conclusions,the following suggestions are put forward: on the one hand,it is a systematic project to promote the increase of labor income share,and we should pay attention to the optimization of enterprise financial environment and the construction of labor market;on the other hand,we should promote the policy of de-leverage and debt reduction based on the consideration of financial stability;on the other hand,we should pay more attention to creating a stable leverage environment;on the other hand,we should pay attention to redistribution.For the role of increasing the share of labor income.