| Variable | Definition | Calculation |
|---|---|---|
| A. Main variables | ||
| Cash | Cash holdings | The sum of cash, marketable securities and short-term investments divided by total assets |
| Heter | Human resource heterogeneity | We classify employees into six categories based on their skills (administration, operation (or production), marketing, R&D, finance and others), construct a six-dimension human resource vector for each firm, calculate cosine similarity in the skill structure of employees between the firm and its peers within the same industry and year, take the average, and use its opposite as a proxy for human resource heterogeneity |
| Apay | Salaries per employee | Accrued salaries (in 10,000 yuan) divided by the number of employees |
| Eduinput | Training costs per employee | The sum of education and labor union expenses (in 10,000 yuan) divided by the number of employees |
| Laborinten | Labor intensity | The natural logarithm of the number of employees divided by total assets |
| Perdis | Regional labor disputes | An indicator variable for firms in regions where the number of labor disputes exceeds the annual mean |
| Rail | External employment opportunities | An indicator variable for a high-speed rail station within 30 km of the firm |
| B. Control variables | ||
| Ocf | Operating cash flow | Net cash flow from operating activities divided by total assets |
| Sdsale | Operating risk | The standard deviation of sales revenue for the past eight quarters |
| Lev | Financial leverage | Interest-bearing liabilities divided by total assets |
| Size | Firm size | The natural logarithm of total assets |
| Btm | Growth opportunities | Book value of equity divided by stock market value |
| Indcomp | Market competition | The opposite of the Herfindahl–Hirschman index calculated using the sales revenue of listed firms in the same industry |
| Dual | CEO duality | An indicator variable for the CEO chairing the board |
| Firstshr | Shareholding by the largest shareholder | The proportion of shares held by the largest shareholder |
| Age | Firm age | The number of years since listing |
| Soe | State ownership | An indicator variable for firms controlled by governments above the county level |
| C. Other variables | ||
| Abovecoll | Education level of the regional population | The proportion of the population with a bachelor’s degree or above in the province where the firm is located |
| Popu | Population density | The natural logarithm of the total population at the end of the year in the province where the firm is located |
| Rdratio | Proportion of R&D staff | The number of R&D staff divided by the number of employees |
| Mdasimilar | Management system heterogeneity | The similarity in the text of Management Discussion and Analysis (MD&A) between the firm and its peers within the same industry |
| IPOHeter | Human resource heterogeneity at the time of the IPO | The dissimilarity in the skill structure of employees between the firm and its peers within the same industry at the time of the IPO |
| PPEInv | Capital investment | Cash paid for fixed assets scaled by total assets |
| UnderInv | Underinvestment | We estimate the model in Equation (4) and take the residual for each firm-year. UnderInv takes the absolute of the residual with a negative residual and zero otherwise |
| ΔRet | Excess stock return | Annual stock return minus average annual stock return in the industry |
| ΔC/M | Change in cash holdings | Change in cash holdings from year t−1 to t divided by the market value of equity at year t−1 |
| ΔE/M | Change in earnings before interest and tax | Change in earnings before interest and tax from year t−1 to t divided by the market value of equity at year t−1 |
| ΔNA/M | Change in net assets | Change in net assets from year t−1 to t divided by the market value of equity at year t−1 |
| ΔRD/M | Change in R&D expenditures | Change in R&D expenditures from year t−1 to t divided by the market value of equity at year t−1 |
| ΔDiv/M | Change in dividend | Change in dividend from year t−1 to t divided by the market value of equity at year t−1 |
| ΔInt/M | Change in interest expenses | Change in interest expenses from year t−1 to t divided by the market value of equity at year t−1 |
| Lever | Total leverage | Total liabilities divided by the sum of total liabilities and market value of equity |
| NF/M | Net finance | The sum of net new equity issues and net new debt issues divided by the market value of equity at year t−1 |
| Variable | Definition | Calculation |
|---|---|---|
| Cash holdings | The sum of cash, marketable securities and short-term investments divided by total assets | |
| Human resource heterogeneity | We classify employees into six categories based on their skills (administration, operation (or production), marketing, R&D, finance and others), construct a six-dimension human resource vector for each firm, calculate cosine similarity in the skill structure of employees between the firm and its peers within the same industry and year, take the average, and use its opposite as a proxy for human resource heterogeneity | |
| Salaries per employee | Accrued salaries (in 10,000 yuan) divided by the number of employees | |
| Training costs per employee | The sum of education and labor union expenses (in 10,000 yuan) divided by the number of employees | |
| Labor intensity | The natural logarithm of the number of employees divided by total assets | |
| Regional labor disputes | An indicator variable for firms in regions where the number of labor disputes exceeds the annual mean | |
| External employment opportunities | An indicator variable for a high-speed rail station within 30 km of the firm | |
| Operating cash flow | Net cash flow from operating activities divided by total assets | |
| Operating risk | The standard deviation of sales revenue for the past eight quarters | |
| Financial leverage | Interest-bearing liabilities divided by total assets | |
| Firm size | The natural logarithm of total assets | |
| Growth opportunities | Book value of equity divided by stock market value | |
| Market competition | The opposite of the Herfindahl–Hirschman index calculated using the sales revenue of listed firms in the same industry | |
| CEO duality | An indicator variable for the CEO chairing the board | |
| Shareholding by the largest shareholder | The proportion of shares held by the largest shareholder | |
| Firm age | The number of years since listing | |
| State ownership | An indicator variable for firms controlled by governments above the county level | |
| Education level of the regional population | The proportion of the population with a bachelor’s degree or above in the province where the firm is located | |
| Population density | The natural logarithm of the total population at the end of the year in the province where the firm is located | |
| Proportion of R&D staff | The number of R&D staff divided by the number of employees | |
| Management system heterogeneity | The similarity in the text of Management Discussion and Analysis (MD&A) between the firm and its peers within the same industry | |
| Human resource heterogeneity at the time of the IPO | The dissimilarity in the skill structure of employees between the firm and its peers within the same industry at the time of the IPO | |
| Capital investment | Cash paid for fixed assets scaled by total assets | |
| Underinvestment | We estimate the model in | |
| Δ | Excess stock return | Annual stock return minus average annual stock return in the industry |
| Δ | Change in cash holdings | Change in cash holdings from year |
| Δ | Change in earnings before interest and tax | Change in earnings before interest and tax from year |
| Δ | Change in net assets | Change in net assets from year |
| Δ | Change in R&D expenditures | Change in R&D expenditures from year |
| Δ | Change in dividend | Change in dividend from year |
| Δ | Change in interest expenses | Change in interest expenses from year |
| Total leverage | Total liabilities divided by the sum of total liabilities and market value of equity | |
| Net finance | The sum of net new equity issues and net new debt issues divided by the market value of equity at year | |
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