Labor Outsourcing and the Cost of Debt

Using the Chinese A-share listed enterprises from 2015 to 2022, this paper investigates the impact of labor outsourcing on the cost of debt. I find that labor outsourcing reduces the cost of debt. The research conclusion is still valid after a series of robustness tests. In terms of economic significance, labor outsourcing reduces the cost of debt by 9.43%. The mechanism tests suggest that labor outsourcing can reduce the cost of debt by improving corporate performance and information transparency. Further analyses find that the relationship between labor outsourcing and the cost of debt is more prominent for non-state-owned enterprises and firms located in regions with lower banking competition. This paper is the first empirical study on the impact of labor outsourcing on the cost of debt, which has important theoretical and practical significance.