Market uncertainty and workplace safety: Evidence from China

This study examines the impact of market uncertainty on workplace safety. Using data from Chinese listed companies in high-risk industries during 2008-2016, we find that market uncertainty negatively impacts employee safety, as evidenced by a significant increase in the incidence of employee deaths, the absolute number of deaths, as well as the fatality rate. Our main findings are robust to an extended sample period, an alternative uncertainty measure based on a firm's historical sales growth volatility, high-dimensional fixed effects, as well as a matched sample. To tackle endogeneity, we further exploit two specific settings, i.e., oil price shocks and industrial policy changes, where the sources of uncertainty are clearly identifiable and find conforming results. In terms of the specific channels, our analyses suggest that insufficient safety investment is the primary underlying mechanism through which market uncertainty deteriorates employee safety. Cross-sectional analyses indicate that the negative impacts are stronger for firms with state ownership control and firms in financial constraint, but can be mitigated by better corporate governance, greater digital transformation, as well as stronger Confucian culture. Overall, our findings are consistent with uncertainty worsening employee safety by reducing safety investments.