||This study focus on the effect of leverage on human capital costs. We apply for total managerial compensation and total employee pay as the human capital cost in the company. The results show that leverage has a significantly positive effect on total managerial compensation and total employee pay. In addition, we also examine whether there is a negative effect of leverage on human capital costs or not. We find that the impact of leverage on total employee pay will twice weaker when firms are financially distressed. Moreover, in subsample analysis, we prove that firms face high quit rate will pay more for their employee. For caution′s sake, we want to examine potential endogeneity of leverage by applying 2SLS. We find that after accounting for the concern, book leverage continues to be a positive and significant to total employee pay. Finally, we analyze if the leverage of Taiwanese firms still has a significantly positive effect on total managerial compensation as an external shock that is the global export recession. The results show that when there is an external shock, the significantly positive effect of leverage on total managerial compensation will be weaker or even disappear in export-oriented firms.|
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