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Employee Ownership and Firm Disclosure

58 Pages Posted: 4 Oct 2010 Last revised: 24 Sep 2013

Francesco Bova

University of Toronto - Rotman School of Management

Yiwei Dou

New York University (NYU) - Department of Accounting

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 24, 2013

Abstract

Evidence suggests that managers have an incentive to keep information opaque with the market when negotiating with employees who can extract above-market rents from the firm. We argue that employee ownership should mitigate this incentive to extract above-market rents and, in turn, alleviate the firm’s need to keep information opaque. Consistent with our expectations and using a number of proxies for disclosure, we find that firms whose non-manager employees have strong bargaining power provide less disclosure. However, this effect is mitigated, the greater the equity in company common stock held by non-manager employees. Our results suggest a novel capital market benefit to employee ownership. Specifically, employee ownership for non-manager employees appears to benefit the firm by not only aligning goals between the firm and its employees, but by also increasing disclosure from the firm to all of its stakeholders by mitigating the firm’s need to keep information opaque.

Keywords: Employee Ownership, Employee Bargaining Power, Disclosure, Research Design

JEL Classification: M10, M20, M40, M50, M51, P16, J20, J50, J51, J53, L21, G30

Suggested Citation

Bova, Francesco and Dou, Yiwei and Hope, Ole-Kristian, Employee Ownership and Firm Disclosure (September 24, 2013). Available at SSRN: https://ssrn.com/abstract=1687108 or http://dx.doi.org/10.2139/ssrn.1687108

Francesco Bova

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-3985 (Phone)

Yiwei Dou

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street
Suite 10-180
New York, NY 10012
United States

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx

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