Internal capital markets and employee wage: Evidence from China

The existing literature mainly focuses on the economic consequences of the internal capital market at firm level, while rarely literatures explore the effect on individual perspective. Based on manually collected data of the internal capital market from 2007 to 2018 in Chinese business groups, we examined whether and how internal capital market affects the employee wage. We find that internal capital market can add the employees wage. Further, the mechanism analysis shows that internal capital market can improve the employees wage by reducing operating risks, improving capital intensity and alleviating financing constraints. Heterogeneity analysis shows that this effect is more significant for private enterprises. This paper provides useful guideline for the improvement of employee's welfare and then benefit for enhance firm productivity.