Labor protection, information disclosure and analyst forecasts: Evidence from China's Labor Contract Law

Labor protection increases employees' stability and strengthens their monitor-ing role, improving firms' information environment and increasing analysts' earnings forecast accuracy. Using the implementation of China's Labor Con-tract Law as a quasi-natural experiment, we find that labor protection signif-icantly improves analyst forecasts. This positive impact is stronger when agency problems are weaker, board independence is greater, corporate reputa-tion is better and industry competition is more intense. Enhanced labor protec-tion significantly reduces firms' business risk and accrual-based earnings management, decreases stock price synchronicity and increases market pricing efficiency. Our findings of significant impacts of China's Labor Contract Law on analysts' forecasting behaviors offer important guidance for promoting the development of the Chinese capital market and policy making in labor protection. (c) 2022 Sun Yat-sen University. Production and hosting by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecom-mons.org/licenses/by-nc-nd/4.0/).