Wage Volatility and Firm Performance: The Roles of Foreign  Ownership and Firm Growth Opportunities for Performance

Donghyun  Son; Taeyoung  Yoo

doi:10.36941/ajis-2025-0001

Authors

Donghyun Son Associate Professor, School of Business, Hankuk University of Foreign Studies, 107 Imun-ro, Dongdaemun-gu, Seoul (02450), South Korea
Taeyoung Yoo Professor, School of Business, Hankuk University of Foreign Studies, 107 Imun-ro, Dongdaemun-gu, Seoul (02450), South Korea

DOI:

https://doi.org/10.36941/ajis-2025-0001

Keywords:

wage volatility, corporate governance, foreign ownership, growth opportunity

Abstract

Extending the literature investigating the relationship between turbulent firms and employee wage volatility, this study examines how volatile wages could affect firm performance. Further, this study analyzes various conditions under which the impact of wage volatility on firm performance could be varied. This study draws on the roles of governance mechanisms, particularly foreign ownership, and the firm’s growth opportunity. Based on 4,594 firm-year observations of Korea from 2012 to 2019, the fixed-effect panel data analysis shows that wage volatility negatively affects firm performance. Nevertheless, the negative effects turn positive with the increase of foreign ownership. The positive change is particularly conspicuous when a firm’s growth opportunity is high. Overall, the findings of this study suggest that although wage volatility generally leads to poor firm performance, it would be able to improve the performance under certain circumstances such as growth firms with a proper governance mechanism (foreign ownership).

Received: 3 October 2024 / Accepted: 4 January 2025/ Published: 11 January 2025