Does brain gain enhance firm value? Evidence from China

We select China to examine how education contributes to the drastic economic transition from a socialist system to one of two global superpowers in such a short period of just over 40 years. We document that brain gains, the proportion of highly educated employees, enhance firm value and that graduate degree holders affect firm value more positively than undergraduate degree holders. We also find that the value effect of brain gains persists for at least five years; digital technology further strengthens brain gain's positive effect on firm value. In addition, brain gains' promotion of firm value is more pronounced for non-state-owned and manufacturing firms.