Using unique Chinese data classifying labor according to the function it performs within a rm, we document that growth in the marketing and sales workforce positively predicts future profitability and returns in the cross-section, with an annual long-short portfolio return spread of 7.4%. In contrast, neither total labor growth nor growth in other labor functions has significant predictive power. These findings are in stark contrast to the negative labor growth effect observed among U.S. stocks. We show that a common explanation based on expected fundamental profitability helps to reconcile the differences across the Chineseand U.S. stock markets.

The seminar will be held both in presence and online at this link