Shareholder Rights and Employment

32 Pages Posted: 15 Aug 2011

See all articles by Curtis M. Hall

Curtis M. Hall

Drexel University - Bennett S. LeBow College of Business

Date Written: August 8, 2011


In this paper I hypothesize and find that both shareholder rights and debt have significant effects on firm-employee relationships. I find that, consistent with ineffective resource management, firms with weaker governance have more employees per assets and are more likely to hire due to sales growth. I use changes in investment in capital and R&D to rule out that this result is due entirely to the propensity of poorly governed firms to overinvest. Furthermore, this study shows that while weak shareholder rights are associated with lower labor productivity, higher debt is also associated with lower labor productivity. Finally, I show that higher labor productivity is associated with higher wages, and that firms with weak shareholder rights pay more for this productivity. These results are consistent with the theory that debt discipline and shareholder monitoring, although both forms of corporate governance, are subject to the differing incentives of debt and equity investors.

Keywords: Corporate Governance, Employment, Wages

JEL Classification: G32, J39, J63

Suggested Citation

Hall, Curtis M., Shareholder Rights and Employment (August 8, 2011). AAA 2012 Management Accounting Section (MAS) Meeting Paper, Available at SSRN: or

Curtis M. Hall (Contact Author)

Drexel University - Bennett S. LeBow College of Business ( email )

Philadelphia, PA 19104
United States

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