Human resource quality and firm performance: the role of education in China

This paper examines the effects of human resource quality (HRQ) on multidimensional firm performance of Chinese listed firms. Consistent with the positive role of education, we find that higher HRQ contributes to Chinese listed firms with higher return on equity (ROE) and higher market to book ratio (MTB). We address endogeneity concerns with change model regressions, instrumental variable methodology and difference-in-difference analysis. The findings are robust to alternative research designs and different subsets of sample firms. Additional analyses show that the HRQ effects on overall performance are channeled by intermediate performance on productivity, innovation, debt financing and analysts following.