Employee Ownership, Board Representation, and Corporate Financial Policies

44 Pages Posted: 2 Apr 2009 Last revised: 17 Jun 2015

See all articles by Edith Ginglinger

Edith Ginglinger

Université Paris-Dauphine, PSL Research University

William L. Megginson

University of Oklahoma

Timothée Waxin

Fédération Bancaire Française

Multiple version iconThere are 2 versions of this paper

Date Written: January 14, 2011

Abstract

French law mandates that employees of publicly listed companies can elect two types of directors to represent employees. Privatized companies must reserve board seats for directors elected by employees by right of employment, while employee-shareholders can elect a director whenever they hold at least 3% of outstanding shares. Using a comprehensive sample of firms in the Société des Bourses Françaises (SBF) 120 Index from 1998 to 2008, we examine the impact of employee-directors on corporate valuation, payout policy, and internal board organization and performance. We find that directors elected by employee shareholders increase firm valuation and profitability, but do not significantly impact corporate payout policy. Directors elected by employees by right significantly reduce payout ratios, but do not impact firm value or profitability. Employee representation on corporate boards thus appears to be at least value-neutral, and perhaps value-enhancing in the case of directors elected by employee shareholders.

Keywords: Employee Ownership, Payout Policy, Privatization, Corporate Boards

JEL Classification: G32, G35, G38, J54, J83

Suggested Citation

Ginglinger, Edith and Megginson, William L. and Waxin, Timothée, Employee Ownership, Board Representation, and Corporate Financial Policies (January 14, 2011). Journal of Corporate Finance, 2011, 17, 868-887. Available at SSRN: https://ssrn.com/abstract=1252645

Edith Ginglinger

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

William L. Megginson (Contact Author)

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Timothée Waxin

Fédération Bancaire Française ( email )

18 rue La Fayette
Paris, 75009
France

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