Banks and Labor as Stakeholders: Impact on Economic Performance

49 Pages Posted: 27 Jan 2010

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Kenichi Ueda

University of Tokyo - Faculty of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: October 7, 2009

Abstract

The stakeholder view of corporate governance, especially when based on incomplete-contracts theory, suggests that stakeholders’ relative bargaining powers affect overall firm performance. We investigate this utilizing a natural experiment in the U.S. Specifically, we study the impact of bank branch deregulations and increases in employment protection, which were introduced at different times on a state-by-state basis between 1972 and 1993. We find that financial deregulation impacts overall state growth positively but stronger employment protection affects it ambiguously. At the state-industry level, greater employment protection hinders the growth of low-skill industries but promotes the growth of knowledge-intensive industries. We further find that this effect stems from stronger relative bargaining powers of workers, in addition to the effects of higher absolute employment protection. We conclude that stakeholders’ corporate governance is especially relevant for knowledge-intensive industries.

Keywords: Corporate Governance, Stakeholders, Shareholders’ Value Maximization, Financial Liberalization, Employment Protection, Banking, Knowledge Intensity

JEL Classification: G18, G30, G38, J08, J80, J83

Suggested Citation

Claessens, Stijn and Ueda, Kenichi, Banks and Labor as Stakeholders: Impact on Economic Performance (October 7, 2009). Available at SSRN: https://ssrn.com/abstract=1543287 or http://dx.doi.org/10.2139/ssrn.1543287

Stijn Claessens

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Kenichi Ueda (Contact Author)

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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