The Effect of State Ownership on the Relationship between Labor Protection and Labor Investment Efficiency

Objective: All developed and developing countries emphasize the importance of human resource efficiency in companies as one of the necessities in economic development and gaining competitive advantage in the international arena. Nowadays, thanks to the approval of various laws, the issue of labor force protection has been widely spread worldwide, including in Iran, and it is expected that such protection for the labor force improves the efficiency of the investment of human resources in companies. Based on this, the main purpose of the current research is to investigate the relationship between labor protection and labor investment efficiency in companies listed on Tehran Stock Exchange, taking into account the role of state ownership.
Method: This research is an applied study and post-event type. All the companies listed on the Tehran Stock Exchange constitute the statistical population. The statistical sample includes 141 companies that were investigated from 2017 to 2021. In this research, the data was extracted through the 3^rd edition of Rahvard Navin software; then, variables were summarized, classified and in some cases calculated using Excel software, and finally the research hypotheses were tested through Eviews software version 10, an econometric software. According to the objectives of this study and the existing theoretical and experimental literature, the research hypotheses are designed as follows:
First hypothesis: A significant relationship exists between labor protection and investment efficiency.
Second hypothesis: State ownership leads to a more prominent relationship between labor protection and labor investment efficiency.
It should be noted that to test the research's first hypothesis, the multivariable regression model is used as follows. Also, to test the second hypothesis, regression model 1 is examined separately for state ownership in two stances of more than the median and less than the median.
Ab_Net_Hire_it = β₀ + β₁D_LaborInt_it + β₂BM_it + β₃ROA_it + β₄LnSize_it + β₅Quick_it + β₆Tangible_it + β₇Lev_it + β₈Std_CFO_it + β₉St_Sales_it + β₁₀Std_E_it + ε_it                            (1)
In the above model, Ab_Net_Hire indicates the labor investment efficiency, D_LaborInt indicates labor protection, MB indicates book value to market value, ROA indicates the return on assets, LnSize indicates the size of the company, Quick Indicates the quick ratio, Tangible indicates tangible assets, Lev indicates financial leverage, St__CFO indicates the standard deviation of cash flows, Std__Sales indicates the standard deviation of sales and Std_E indicates the standard deviation of the number of employees. The independent variable of this research is labor protection, which was measured using a dummy variable based on labor intensity. First, the annual median of the ratio of employees to the company's fixed assets in the industry is considered a criterion. If the labor intensity of a sample company is greater than the annual median of the industry, it takes the value of one; otherwise, it takes zero. Also, labor investment efficiency is the dependent variable of this research, which is measured according to Pinnuck and Lillis's (2007) model. The moderating variable of this study is state ownership, which was used as the percentage of state ownership from the total shares held by governmental and quasi-governmental organizations. Following Gao et al. (2021), it divides into the upper median (state companies) and less than the median (non-state companies). It should be noted that in this work, the variables of book value to market value, return on assets, company size, current ratio, tangible assets, financial leverage, standard deviation of cash flows, standard deviation of sales and standard deviation of the number of employees were used as control variables.
Results: This research showed a negative and significant relationship between labor protection and the companies' labor investment efficiency at the 95% confidence level. Improving the protection of the labor force leads to a decrease in the efficiency of human capital investment of companies on the Tehran Stock Exchange. Also, the results at the level of each state and non-state companies also showed a negative and significant relationship between labor protection and the companies' labor investment efficiency. Therefore, it can be said that state ownership leads to the highlight of the negative relationship between labor protection and labor investment efficiency.
Conclusion: The research results indicate that labor protection has different economic consequences for transforming human capital structures in companies and can reduce the efficiency of human capital investment. Considering this issue, it is suggested that companies pay more attention to making decisions regarding employment to prevent inefficient human resource use by protecting the labor force. Also, investors and capital market analysts are suggested to pay attention to labor protection in addition to financial variables when making investment decisions and include it in their decision-making models as an effective factor in reducing the companies' labor investment efficiency.