Confucianism and employee treatment: Evidence from China

Abstract

This study examines the effect of Confucianism, an influential cultural belief and ethical philosophy in East Asia, on employee treatment policies within Chinese listed companies from 2010 to 2020. Our key finding is that Confucianism is positively associated with employee‐friendly practices. We further identify three plausible economic channels through which Confucianism shapes employee‐friendly treatment: valuing human‐centric ethics, mitigating managerial myopia, and alleviating agency conflicts. Cross‐sectionally, the documented impact is more prominent for firms operating with weaker union power and those with executives lacking overseas experience. Additionally, employee‐friendly firms exhibit higher employee efficiency, innovation output, and firm value, indicating that investing in employee benefits ultimately translates into better financial performance. Collectively, we shed light on the unique role of cultural norms in fostering employee treatment policies and their consequential effects on organizational value.